Gene Editing Versus Genetic Modification in the Research and Development of New Crop Traits: An Economic Comparison
David Bullock (),
William W. Wilson and
American Journal of Agricultural Economics, 2021, vol. 103, issue 5, 1700-1719
Gene editing is a relatively new plant‐breeding tool that, unlike earlier methods such as genetic modification, is more precise in targeting its manipulations to site‐specific locations within the genome. This precision with gene editing offers considerable research and development cost economies and a higher probability of success, particularly for the initial discovery phase of research and development. This study quantifies the advantages of gene editing versus genetic modification by examining the minimum required planted area for a proposed trait where a typical crop technology company can expect to break even on its research and development investment using a real option valuation model. A novel feature of the model is the combination of a decision tree with a binomial lattice for project valuation with an embedded abandonment real option. A primary numerical result from the model was the observation that gene editing required a much smaller potential market area (96% smaller) to break even on the financial investment when compared to genetic modification for the same trait value per acre. This result held across a wide range of potential trait values. Sensitivity analysis on the results indicated that the much higher probability of success for gene editing in the discovery phase of research and development was the primary driver of the difference in break‐even acreage.
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Persistent link: https://EconPapers.repec.org/RePEc:wly:ajagec:v:103:y:2021:i:5:p:1700-1719
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