The Product Line Strategy of a Company Selling Seed with a Licensed GM Trait

Lemarié Stéphane (), Baghdasaryan Delia and Campens Etienne
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Lemarié Stéphane: GAEL, INRA, University Grenoble Alpes, CNRS, Grenoble-INP, F-38000Grenoble, France
Baghdasaryan Delia: GAEL, INRA, University Grenoble Alpes, CNRS, Grenoble-INP, F-38000Grenoble, France
Campens Etienne: GAEL, INRA, University Grenoble Alpes, CNRS, Grenoble-INP, F-38000Grenoble, France

Journal of Agricultural & Food Industrial Organization, 2017, vol. 15, issue 1, 15

Abstract: The economic impact of Genetically Modified Organisms (GMOs) depends heavily on the product line supplied by the seed companies. In this paper, we analyze the interlinking between seed product line and license contract signed between the seed company and the upstream agbiotech firm which owns the Genetically Modified (GM) trait. We show that if the farmers are sufficiently heterogeneous, the seed company prefers to price discriminate by supplying both GM and conventional seeds. In those circumstances, despite higher efficiency of the GM seed, the price increase is such that the farmer’s surplus decreases. This loss may even outweigh the aggregate gains of the seed and the agbiotech companies, thereby leading to a total welfare loss.

Keywords: price discrimination; licensing; GMOs (search for similar items in EconPapers)
JEL-codes: D43 Q16 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/jafio-2016-0030

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