Incentive to Reduce Crop Trait Durability

To reduce the competition from farmers who self-produce seed, an inbred line seed producercan switch to nondurable hybrid seed. In a two-period model we investigate the impactof crop durability on self-production, pricing and switching decisions, and we examine theimpact of license fees paid by self-producing farmers. First, in an inbred line seed monopolymodel, we find that the monopolist may produce technologically dominated hybrid seed inorder to extract more surplus from farmers. Further, the introduction of license fees improvesefficiency. Second, we study how the monopolist’s behavior is affected by the entry of a nondurablehybrid seed producer. We show that the inbred line seed producer might benefitfrom competing with a technologically dominated hybrid seed producer, as this allows forconsumers’ discrimination.[...]