Monopolistic pricing power for transgenic crops when technology adopters face irreversible benefits and costs

Robert D. Weaver, Justus Wessler

Research output: Contribution to journalArticlepeer-review

11 Scopus citations

Abstract

Pricing of biotechnology innovation under a patent grant is reconsidered in a model with uncertain returns and irreversible costs and benefits. Past results on restricted monopoly pricing in the presence of competing technologies showed that pricing power is reduced. The timing of adoption of an innovation is delayed and the pricing power of the restricted monopolist is further reduced when uncertainty and irreversibility is considered. The presence of irreversible benefits results in increased willingness-to-pay for the innovation, accelerating adoption, and increasing the innovator's restricted monopolist pricing power. Using Monte-Carlo simulation, the quantitative effects were approximated by a linear function through the hyper-plane.

Original languageEnglish (US)
Pages (from-to)969-973
Number of pages5
JournalApplied Economics Letters
Volume11
Issue number15
DOIs
StatePublished - Dec 15 2004

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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