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Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products
Author(s) -
Lapan Harvey E.,
Moschini GianCarlo
Publication year - 2004
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.0002-9092.2004.00606.x
Subject(s) - genetically modified organism , genetically modified food , quality (philosophy) , economics , market failure , business , industrial organization , microeconomics , biology , biochemistry , philosophy , epistemology , gene
A partial‐equilibrium, two‐country model is developed to analyze implications from the introduction of genetically modified (GM) products. In the model, innovators hold proprietary rights, farmers are (competitive) adopters, some consumers deem GM food to be inferior in quality to traditional food, and the mere introduction of GM crops affects the costs of non‐GM food (because of costly identity preservation). Among the results derived, it is shown that, although GM innovations have the potential to improve efficiency, some groups can be made worse off. Indeed, it is even possible that the costs induced by GM innovations outweigh the efficiency gains.