Emergence of Organic Farming under Imperfect Competition: Economic Conditions and Incentives

Mélanie Jaeck (), Robert Lifran and Hubert Stahn
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Mélanie Jaeck: Montpellier Businness School (CEROM) - Montpellier Businness School (CEROM)
Robert Lifran: LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UPVM - Université Paul-Valéry - Montpellier 3 - INRA - Institut National de la Recherche Agronomique - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier

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Abstract: This article explores the economic conditions for the viability of organic farming in a context of imperfect competition. While most research dealing with this issue has adopted an empirical approach, we propose a theoretical foundation. Farmers have a choice between two technologies, the conventional one using two complementary inputs, chemicals and seeds, and the organic one only requiring organic seeds. The upstream markets are oligopolistic and the firms adopt Cournot behavior. The game is solved backward. The equilibrium repartition of the farmers between both sectors is obtained by a free entry condition. Since multiple equilibria could exist, including the non emergence of organic farming, we spell out viability conditions for organic farming. Then, using an "infant industry" argument, we propose several public policy instruments able to support the development of organic farming, and assess their relative efficiency. Results could be useful to assess the conditions of emergence and viability of agricultural innovations in analogous contexts.

Keywords: agricultural inputs; organic farming; imperfect competition; technological choice; free entry; policy design (search for similar items in EconPapers)
Date: 2012-12
Note: View the original document on HAL open archive server: https://shs.hal.science/hal-02805961v2
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