Adverse Selection, Moral Hazard, and Grower Compliance with Bt Corn Refuge

Paul D. Mitchell and Terrance Hurley
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Paul D. Mitchell: University of Wisconsin

Chapter Chapter 27 in Regulating Agricultural Biotechnology: Economics and Policy, 2006, pp 599-623 from Springer

Abstract: Abstract We develop a principal-agent model of grower compliance with Bt corn refuge requirements for managing insect resistance to the Bt toxin. The model endogenizes the technology price, audit rate, and fine imposed on non-complying growers when grower willingness to pay for Bt corn and compliance effort is private information. Empirical analysis finds that practical application requires capping fine revenue. With such a program, the company raises the technology price and achieves complete compliance. The net welfare change (relative to competitive pricing) due to reducing company revenue and restricting technology access remains beyond the scope of this analysis.

Keywords: asymmetric information; Compliance Assurance Program; corn rootworm; resistance management (search for similar items in EconPapers)
Date: 2006
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Working Paper: ADVERSE SELECTION, MORAL HAZARD, AND GROWER COMPLIANCE WITH BT CORN REFUGE (2004)
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DOI: 10.1007/978-0-387-36953-2_27

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