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Promoting innovation on the seed market and biodiversity: the role of IPRs and commercialisation rules

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  • Marc Baudry
  • Adrien Hervouet

Abstract

This article deals with the impact of legislation in the seed sector on incentives for variety creation. Two categories of rules interact. The first category consists in intellectual property rights and is intended to address a problem of sequential innovation and R&D investments by the private sector. The second category concerns commercial rules that are intended to correct a problem of adverse selection on the seed market. We propose a dynamic model of market equilibrium with vertical product differentiation that enables us to take into account the economic consequences of imposing either Plant Breeders’ Rights (PBRs) or patents as IPRs. We simultaneously examine two kinds of commercial legislation: compulsory registration in a catalogue and minimum standards for commercialisation. Analytical results are completed by numerical simulations. The main result is that the combination between minimum standards and PBRs provides higher incentives for sequential innovation and may be preferred by a public regulator to maximise the expected and discounted total surplus when sunk investment costs are low or when they are medium and the probability of R&D success is sufficiently high. This solution differs from the combination of IPRs and commercialisation rules used in both the US and Europe. Otherwise, PBRs have to be replaced by patents, which yields a configuration close to that observed in the US. The catalogue commercialisation rule is seldom preferred to minimum standards, so that the combination of IPRs and commercialisation rules that prevails in Europe is not supported by our model.

Suggested Citation

  • Marc Baudry & Adrien Hervouet, 2014. "Promoting innovation on the seed market and biodiversity: the role of IPRs and commercialisation rules," EconomiX Working Papers 2014-32, University of Paris Nanterre, EconomiX.
    • Handle: RePEc:drm:wpaper:2014-32
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    More about this item

    Keywords

    Intellectual Property Rights; Plant Breeders’ Rights; Catalogue; Product differentiation; Asymmetric information; Biodiversity.;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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