Benefit sharing mechanisms for agricultural genetic diversity use and on-farm conservation

The agricultural genetic diversity is reducing at an accelerating pace. Benefit sharing mechanisms are well-known instruments to incentivize local genetic resource providers to maintain on-farm diversity and to avoid free-riding behaviour by multinational bioprospecting firms. We explore the role of these mechanisms in a setting where the output of bioprospecting activities (i.e. a modern seeds variety) competes, through an indirect channel (the release of a new modern crop variety), with traditional agriculture, but the latter is, in turn, necessary to conserve the genetic pool from which multinational firms could have access to adapted genetic traits for developing new modern varieties in the future. The on-farm diversity is fundamental to increase the option value of conservation. While gene banks guarantee the access to a large genetic pool, the preservation and selection of varieties in ecological niches by farmers ensures an evolutionary process of genetic adaptation from which extracting new useful traits in the future. Thus, we adopt a multistage game where a multinational firm anticipates the impact of its bioprospecting investments and price setting decisions on a local farmer incentives to conserve on-farm genetic diversity. We focus our attention on two benefit sharing mechanisms, namely profits sharing and technology transfers, and compare them with a benchmark featuring free genetic resources access. Our main conclusions suggest that incentives to conservation are the strongest under profit sharing, while a technology transfer produces a genetic erosion that is even higher than under free access. These results shed new light on policy design, especially in developing countries where agricultural genetic diversity is a strategic natural asset.