Response to an Asymmetric Demand for Attributes: An Application to the Market for Genetically Modified Crops
Sergio H. Lence, Dermot J. Hayes
November 2001 [01-MWP 5]
Lence, S.H. and D.J. Hayes. 2001. "Response to an Asymmetric Demand for Attributes: An Application to the Market for Genetically Modified Crops." MATRIC working paper 01-MWP 5. Center for Agricultural and Rural Development, Iowa State University.
A framework is developed for examining the price and welfare effects of the introduction of genetically modified (GM) crops. In the short run, non-GM grain generally becomes another niche product. However, more profound market effects are observed under some reasonable parameterizations. In the long run, consumer and producer welfare are usually greater after the introduction of GM technology. Nevertheless, in all instances some consumers and some producers lose. When identity preservation is expensive and cost savings are relatively small, both producer and consumer welfare are lower after introducing GM technology. Interestingly, this outcome is obtained even though all agents are individually rational.