The market acceptance and welfare impacts of genetic use restriction technologies (GURTS)

The paper develops a theoretical framework of heterogeneous consumers and producers to examine the market and welfare effects of the introduction of variety-level genetic use restriction technologies (V-GURTs) under the current No-Labeling regime of GMPs in the US market. Specifically, the study examines how the agronomic characteristics of GURTs, consumer perceptions and preferences regarding interventions in the production process (i.e., genetic modification) and producer cost structures (e.g., dependency on saving seed) affect the adoption of the technology by producers, the market acceptance of GURTs by consumers and consequently the innovator's incentive to introduce the new technology. Analytical results show that the introduction of GURTs may be welfare enhancing for consumers, producers and innovating firms when consumer aversion to GURTs is low, the agronomic benefits of the GURTs crop are high, and the expected penalty producers face when they cheat on their GM licensing agreements (e.g., due to inefficient or costly monitoring) is low.genetic use restriction technologies, genetic modification, producer and consumer welfare, Research and Development/Tech Change/Emerging Technologies,

AGRICULTURAL BIOTECHNOLOGY AND ORGANIC AGRICULTURE: NATIONAL ORGANIC STANDARDS, LABELING AND SECOND-GENERATION OF GM PRODUCTS

This paper examines the effect of the introduction of labels for products of biotechnology on the markets for GM, conventional, and organic food products. In addition, the paper analyzes the market and welfare effects of the introduction of consumer-oriented, second-generation GM products. Analytical results show that while a no-labeling regime is generally beneficial for the organic sector, when segregation costs are sufficiently high the introduction of labels for GM products can enhance the consumption share and growth of the organic sector while driving the conventional products out of the market. The analysis also reveals that the introduction of the consumer-oriented GM products can change the nature of the relationship between GM and conventional and organic products from one of vertical to one of horizontal product differentiation and can enhance both consumer welfare and the market acceptance and growth of agricultural biotechnology. When the value consumers place on the new product is sufficiently high, the introduction of the consumer-oriented GM products can drive the first-generation of GM products and their conventional counterparts out of the market while reducing the consumer demand for organic food. Overall, the market and welfare effects of GM labeling and the introduction of the consumer-oriented GM products are determined by the size of marketing and segregation costs under labeling of GM products, the level of consumer aversion to genetic engineering, the production share of the GM product in the no-labeling case, the structure of the agricultural biotechnology sector, and the benefits consumers perceive from the second-generation of GM products.Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies,

PATENT BREADTH AS AN ENTRY DETERRENT: THE CASE OF VERTICALLY DIFFERENTIATED PRODUCT INNOVATIONS

Patents provide very important incentives for innovative activity by enabling innovators to appropriate innovation rents through the granting of exclusive rights on their innovations. The limit of these exclusive rights is defined by two elements - patent length and patent breadth. Patent length is the time period during which the innovator has exclusive rights on the innovation and is predetermined by law. Patent breadth defines the technological territory claimed and protected by the patent - the area in the technological space within which competitors cannot offer rival innovations without infringing the patent - and is explicitly chosen by the innovator. A standard assumption in the economics literature is that an innovator should always choose to claim the maximum patent breadth, thereby deterring the entry of other firms and thus enabling the innovator to earn monopoly rents (see Gilbert and Shapiro and Gallini for examples of this view). Such a strategy, however, fails to recognize that patents are often challenged legally in the Patent Office or in the courts (Cornish). The nature of this challenge is such that the broader is the patent protection, the higher is the probability that the patent will be challenged legally by competitors, that it will overlap another patent and/or that the courts will invalidate it or narrow its scope (Lerner). Given that patent breadth is routinely challenged, the question arises as to whether the innovator is able to choose a patent breadth that deters entry, or whether the innovator is forced to share the market with a new entrant. The purpose of this paper is to examine the optimal patent breadth strategy that an innovator should employ when faced with the possibility that the patent breadth claimed will be challenged. In this paper, the optimal patent strategy is determined in a sequential game of complete information. The agents in the game are an innovator who seeks patent protection and decides on the patent breadth claimed and a potential entrant who decides on whether to enter the patentee's market and, if entry occurs, where to locate in the vertically differentiated product space. The solution to this game is obtained by backward induction - the problem of the entrant is examined first, followed by the problem of the innovator. The paper shows that that it is possible under some conditions for an innovator to use patent breadth to deter entry - when this is possible, the optimal patent strategy is to always deter entry. These conditions occur under certain combinations of the entrant's R&D effectiveness and trial cost values (i.e., low R&D effectiveness - which results in high R&D costs - and high trial costs). When these specific conditions do not hold, the optimal strategy for the innovator is to allow a new competitor to enter the market. When allowing entry, the innovator chooses patent breadth so that the benefits of increased product differentiation that result from greater patent breadth are traded off with the increased likelihood of patent challenge that comes with greater patent breadth. One of the conclusions of the paper is that the innovator will only choose the maximum patent breadth when patent infringement is never an optimal strategy for the entrant. This occurs under a very specific set of conditions (i.e., a combination of very high R&D effectiveness and high trial costs values).Research and Development/Tech Change/Emerging Technologies,

Using Economics Experiments to Understand Patent Licensing Behavior

Research and Development/Tech Change/Emerging Technologies,

Consumer purchasing decisions and welfare under country of origin. Labelling regulation

This study develops a theoretical framework of heterogeneous consumer preferences to examine the effect of voluntary and mandatory country of origin labeling (COOL) on consumer purchasing decisions and welfare when consumers view COOL information as an attribute that differentiates products vertically and horizontally. Analytical results of both the vertically and horizontally differentiated product models show that the change from a no COOL to a mandatory COOL regime decreases (increases) the welfare of consumers with weak (strong) preference for COOL. A change from a no COOL to a voluntary COOL regime leads to an undisputed increase in consumer welfare which results from an increase in the welfare of consumers with strong preference for COOL, while the welfare of consumers with weak preference for COOL remains unchanged. A change from a voluntary to a mandatory COOL regime leads to a consumer welfare loss in the vertically differentiated product model and in the horizontally differentiated product model when product relocation is prohibitively costly. In both the above models, a switch from voluntary to mandatory COOL decreases the welfare of consumer with weak preference for COOL, while it keeps the welfare of consumers with strong preference for COOL unchanged. A change from a voluntary to a mandatory COOL regime in the horizontally differentiated product market when product relocation is possible leads to a decrease in the welfare of consumer with both weak and strong preference for COOL and to possible welfare gains for those consumers who place greater value in country of origin information under mandatory than under voluntary COOL.country of origin labeling, heterogeneous consumer preferences, vertical and horizontal product differentiation., Consumer/Household Economics,

The Market Acceptance and Welfare Impacts of Genetic Use Restriction Technologies (GURTs)

The paper develops a theoretical framework of heterogeneous consumers and producers to examine the market and welfare effects of the introduction of variety-level genetic use restriction technologies (V-GURTs) under the current No-Labeling regime of GMPs in the US market. Specifically, the study examines how the agronomic characteristics of GURTs, consumer perceptions and preferences regarding interventions in the production process (i.e., genetic modification) and producer cost structures (e.g., dependency on saving seed) affect the adoption of the technology by producers, the market acceptance of GURTs by consumers and consequently the innovator's incentive to introduce the new technology. Analytical results show that the introduction of GURTs may be welfare enhancing for consumers, producers and innovating firms when consumer aversion to GURTs is low, the agronomic benefits of the GURTs crop are high, and the expected penalty producers face when they cheat on their GM licensing agreements (e.g., due to inefficient or costly monitoring)is low.Consumer/Household Economics,

Consumer Attitudes and Labeling Regimes as Determinants of the Market Success of Food Nanotechnology

In a recent poll conducted by the Institute of Food Technologists, when consumers were asked about their knowledge of nanotechnology and its applications to the food sector, two-thirds said they had heard ‘nothing at all’ about the technology (Food Safety News 2010). European polls tell a similar story; a 2010 Eurobarometer survey showed that, while public awareness of nanotechnology is gradually emerging, more than half of the respondents knew nothing about the technology, and could not tell whether it would have a positive or a negative impact on their lives (European Commission 2010). According to the National Nanotechnology Initiative, nanotechnology is “a science that involves the design and application of structures, devices and systems on a nanoscale; that is billionths of a meter.” Among early adopting industries of nanotechnology have been high profit margin sectors like cosmetics’, sports equipment and apparel. As the development of nanotechnology moves from first-generation (material) to second-generation (component) and third-generation (device) technologies, its potential applications to industrial sectors such as pharmaceuticals, biotechnology, medical devices, energy, national security and defense and the agri-food sector can be limitless (The Nanotechnology Institute 2012)

Food Fraud: A persistent problem that demands a comprehensive approach

Food fraud commonly refers to the deliberate and economi­cally motivated adulteration and mislabeling of food, but more broadly defined it also includes food theft, simulation that makes a fraudulent food product look like the legiti­mate product it copies, diversion, and overrun (Moyer et al. 2017). It is a longstanding and persistent challenge that impacts the global food sector; according to some estimates, food fraud results in annual costs of $40 billion (Food Standards Agency 2020). The complexity of globalized agri-food supply chains which are long, fast-moving, and involve a large number of intermediaries, coupled with lax regulatory monitoring and oversight and lenient penalties, create opportunities for both legitimate actors who oper­ate in the food supply chain and criminal organizations to engage in food fraud

TO PATENT OR NOT TO PATENT: THE ROLE OF OPTIMAL PATENT BREADTH AND THE DECISION TO DEFEND THE PATENT RIGHT

The paper examines the relationship between the innovator's patenting and patent breadth decisions as well as how these two decisions affect, and are affected by, the innovator's ability to enforce her patent rights. An important feature of the model is that the entrant may be able, by his choice of location in product space, to affect the innovator's decision to defend her patent. An interesting finding of the paper is that the innovator might find it optimal to patent her innovation even when she chooses to not defend her patent by invoking a trial when patent infringement occurs. The paper also shows that, in most cases, the greater is the entrant's R&D effectiveness, the smaller is the innovator's incentive to patent her product. If patenting occurs, however, the greater is R&D effectiveness, the greater is the patent breadth that could be chosen without triggering infringement.Research and Development/Tech Change/Emerging Technologies,