Spatial Efficiency of Genetically Modified and Organic Crops

We analyze the spatial distribution of genetically modified (GM) and organic crops. Because some organic crops will likely be contaminated by GM crops, not all of the non- GM crops can be sold as organic. Therefore, the choice of producing organic crops will depend on the surrounding crops. When producers follow individual strategies, many spatial configurations arise in equilibrium, some being more efficient than others. We examine how coordination among producers has an impact on the spatial distribution of crop varieties. We show that coordination among only a small number of producers can greatly improve efficiency. For instance, an organic producer who has two GM neighbors needs to coordinate only with one of them to reduce spatial externality and improve efficiency.