THE EFFECT OF MARKET STRUCTURE ON ADAPTATION TO CLIMATE CHANGE IN AGRICULTURE

Sangjun Lee and Suzanne Thornsbury

No 91258, 2010: Climate Change in World Agriculture: Mitigation, Adaptation, Trade and Food Security, June 2010, Stuttgart-Hohenheim, Germany from International Agricultural Trade Research Consortium

Abstract: When assessing climate change impact, adaptation is an important behavioral response to reduce potential risk. But it has been widely recognized that there are barriers to adaptation. And attempts to estimate impacts may be biased when these barriers neglected. Potential barrier on adaptation decision from market structure have not been identified. We develop a theoretical model to evaluate adaptation incentives of farmers under climate change across various market structures. In agricultural production where acreage adjustment is costly, our theoretical model suggests that the “competition effect” plays an important role in determining incentives to adapt. The competition effect in the market may outweigh the production effect and reduce producer incentives to change production practices. Results also suggest that monopolists may have a higher incentive to adapt since the market is under their direct control with less competition even though these incentives are still much smaller than socially optimal levels. In contrast, there can be strategic interactions among players which can lead to inaction (not investing in adaptations) due to the threat of potentially higher competition in other market structures.

Keywords: Environmental Economics and Policy; Industrial Organization; Resource/Energy Economics and Policy (search for similar items in EconPapers)
Pages: 19
Date: 2010
New Economics Papers: this item is included in nep-agr, nep-ene and nep-env
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:iatr10:91258

DOI: 10.22004/ag.econ.91258

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