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Of Shrimp and Men

Author

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  • Amanda De Pirro
  • Renaud Foucart

Abstract

Building on a model of competition with endogenous product differentiation and using data from the shrimp aquaculture industry, we show how a cost-reducing innovation can hurt the profit of the innovator by decreasing product diversity and strengthening competition. In the late 1990s, a US governmental program designed a new pathogen-free breed reducing the production cost of white legs shrimp. This innovation gave a temporary boost to the profit of American producers, largely specialized in that variety. However, over time other countries abandoned their native production to adopt the new breed. In this phase of technological catch-up US producers thus not only lost their cost advantage, but also the market power derived from the pre-innovation product differentiation.

Suggested Citation

  • Amanda De Pirro & Renaud Foucart, 2022. "Of Shrimp and Men," Working Papers 352589140, Lancaster University Management School, Economics Department.
    • Handle: RePEc:lan:wpaper:352589140
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    References listed on IDEAS

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    More about this item

    Keywords

    innovation; cost paradox; product differentiation; shrimp;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery

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