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An Analysis of the Pricing of Traits in the U.S. Corn Seed Market

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  • Guanming Shi
  • Jean-paul Chavas
  • Kyle Stiegert

Abstract

We investigate the pricing of traits in the U.S. corn seed market under imperfect competition. In a multiproduct context, we examine how substitution/complementarity relationships among products can affect pricing. This is used to motivate generalizations of the Herfindahl-Hirschman index capturing cross-market effects of imperfect competition on pricing. The model is applied to pricing of U.S. conventional and biotech seeds from 2000 to 2007. We reject the standard component pricing in biotech traits in favor of subadditive bundle pricing. The econometric estimates show how changes in market structure (as measured by both own- and cross-Herfindahl indexes) affect U.S. corn seed prices. Copyright 2010, Oxford University Press.

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  • Guanming Shi & Jean-paul Chavas & Kyle Stiegert, 2010. "An Analysis of the Pricing of Traits in the U.S. Corn Seed Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(5), pages 1324-1338.
    • Handle: RePEc:oup:ajagec:v:92:y:2010:i:5:p:1324-1338
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    Cited by:

    1. Fernandez-Cornejo, Jorge & Valle, Karen, 2014. "A Hedonic Model of Corn Seed Prices," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 169667, Agricultural and Applied Economics Association.
    2. Jennifer Clapp & Indra Noyes & Zachary Grant, 2021. "The Food Systems Summit’s Failure to Address Corporate Power," Development, Palgrave Macmillan;Society for International Deveopment, vol. 64(3), pages 192-198, December.
    3. MacDonald, James M. & Dong, Xiao & Fuglie, Keith O., 2023. "Concentration and Competition in U.S. Agribusiness," Economic Information Bulletin 337566, United States Department of Agriculture, Economic Research Service.
    4. Schimmelpfennig, David & Lowenberg-DeBoer, James, 2020. "Farm types and precision agriculture adoption: crops, regions, soil variability, and farm size," Agri-Tech Economics Papers 304070, Harper Adams University, Land, Farm & Agribusiness Management Department.
    5. Shakya, Sumadhur & Wilson, William W. & Dahl, Bruce L., 2013. "Valuing New Random Genetically Modified (GM) Traits in Corn," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 38(1), pages 1-17, April.
    6. Fernandez-Cornejo, Jorge & Livingston, Michael J. & Mitchell, Lorraine & Wechsler, Seth, 2014. "Genetically Engineered Crops in the United States," Economic Research Report 164263, United States Department of Agriculture, Economic Research Service.
    7. Zhang, Wenhui & Shi, Guanming, 2012. "An Exploration of Product Choices in U.S. Biotech Corn Seed Market," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124758, Agricultural and Applied Economics Association.
    8. Nolan, Elizabeth & Santos, Paulo & Shi, Guanming, 2012. "Market concentration and productivity in the United States corn sector: 2002-2009," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125941, Agricultural and Applied Economics Association.
    9. Guanming Shi & Kyle W. Stiegert & Jean P. Chavas, 2011. "An analysis of bundle pricing in horizontal and vertical markets: The case of the U.S. cottonseed market," Agricultural Economics, International Association of Agricultural Economists, vol. 42, pages 77-88, November.
    10. Saed Alizamir & Foad Iravani & Hamed Mamani, 2019. "An Analysis of Price vs. Revenue Protection: Government Subsidies in the Agriculture Industry," Management Science, INFORMS, vol. 65(1), pages 32-49, January.
    11. Ma, Xingliang & Shi, Guanming, 2010. "GM vs. Non-GM: A Survival Analysis of Hybrid Seed Corn in the US," Staff Paper Series 553, University of Wisconsin, Agricultural and Applied Economics.
    12. José G. Nuño‐Ledesma, 2022. "A portion cap rule with two products: An experimental evaluation," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(2), pages 123-137, June.
    13. Feng, Jie & Shi, Guanming, 2018. "To Encore or Not? When a Patent Expires: The U.S. Soybean Case," 2018 Annual Meeting, August 5-7, Washington, D.C. 274140, Agricultural and Applied Economics Association.
    14. Lemarié Stéphane & Baghdasaryan Delia & Campens Etienne, 2017. "The Product Line Strategy of a Company Selling Seed with a Licensed GM Trait," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 15(1), pages 1-15, January.
    15. Ma, Xingliang & Shi, Guanming, 2013. "GM vs. Non-GM: A Survival Analysis of U.S. Hybrid Seed Corn," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 42(3), pages 1-19, December.
    16. Alia, Didier Y. & Zheng, Yuqing & Kusunose, Yoko & Reed, Michael R., 2017. "Trade effects of food regulations and standards: Assessing the impact of SPS measures on market structure," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258368, Agricultural and Applied Economics Association.
    17. Shakya, Sumadhur & Wilson, William W. & Dahl, Bruce L., 2012. "Valuing New Random GM Traits: The Case of Drought Tolerant Wheat," Agribusiness & Applied Economics Report 128033, North Dakota State University, Department of Agribusiness and Applied Economics.
    18. Ilin, Cornelia & Shi, Guanming, 2016. "Competition, Price Dispersion and Capacity Constraints: The Case of the U.S. Corn Seed Industry," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236532, Agricultural and Applied Economics Association.
    19. Jayson L. Lusk & Jesse Tack & Nathan P. Hendricks, 2018. "Heterogeneous Yield Impacts from Adoption of Genetically Engineered Corn and the Importance of Controlling for Weather," NBER Chapters, in: Agricultural Productivity and Producer Behavior, pages 11-39, National Bureau of Economic Research, Inc.
    20. Seungki Lee & Yongjie Ji & GianCarlo Moschini, 2021. "Agricultural Innovation and Adaptation to Climate Change: Insights from Genetically Engineered Maize," Center for Agricultural and Rural Development (CARD) Publications 21-wp616, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    21. Ye, Ziwei & Krupke, Christian & DiFonzo, Christina & Hennessy, David A. & Wu, Felicia, 2022. "Aligning Bt Maize Planting with Pest Incidence and Efficacy Erosion Risk Suggests the Need for Paradigm Shifts," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322082, Agricultural and Applied Economics Association.

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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