The International Consortium on Agricultural Biotechnology Research (ICABR)

Non technical abstract

Dynamic Pricing of Genetically

 Modified Crop Traits

Richard Perrin and Lilyan Fulginiti  a

                This paper considers theoretical and empirical time paths of prices for crop traits such as herbicide resistance.  The Coase conjecture suggests that the time path of prices of a durable such as this is a problem for the monopolist owner – feasible price paths will start below the normal monopoly price, will fall rapidly, and the present value of rents may even approach zero.  Whether or not a crop trait is indeed a durable for the buyer is determined first and foremost by technological conditions – whether the cultivar is a hybrid or a variety, for example.  Under utility patent protection, the owner of a technologically-durable trait has the right to exclude the buyer from re-planting the seeds, whereas under plant breeders rights the owner could not exclude re-planting, and the buyer would indeed be purchasing a durable trait.  Under either property rights regime, pirating of a technologically durable trait further diminishes the monopoly position of the trait owner, exacerbating the owners' problem of extracting any rent from the durable.

                The paper develops an explicit pricing game to explore the limitations of the monopolist's ability to extract monopoly rents from a durable crop trait.  The results indicate that under reasonable conditions the owner might realize only a third of the normal rents, and less if there is pirating.  An examination of price paths for Roundup-Ready soybeans and Bt corn in the U.S. and Argentina are consistent with these expectations.


a Professors, Department of Agricultural Economics, University of Nebraska, Lincoln.  Paper prepared for the 5th International Conference on Biotechnology, Science and Modern Agriculture, Ravello, Italy, June 2001. 


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