Abstract
In a Cournot duopoly model, we examine three policy regimes relevant to current international plant breeding: patents alone, patents with a farmer exemption to use saved seed, and patents with research collaboration. In the symmetric version of the model where firms are identical, we show that the social planner prefers patents with research collaboration over patents alone and prefers the patents alone to patents with a farmer exemption. We examine two variations of the model where firms are asymmetric i. due to cost differences and ii. due to the different endowments of germplasm. Situations develop where the research collaboration resolves the common pool problem and increases R&D investment and where it creates free riding problem and decreases R&D investment. We show that the lower cost (more endowed) breeder invests more in R&D under the research collaboration than patents if variety differentiation is high and cost (knowledge endowment) dispersion is low. On the other hand, the higher cost (less endowed) breeder, generally, invests less in R&D under a research collaboration if variety differentiation or cost (knowledge endowment) dispersion is low. These findings suggest new gains are likely from the adoption of international conventions of plant breeders' rights. Keywords: Plant breeding, farmer exemption, research collaboration, Intellectual Property Rights, product differentiation, Cournot oligopoly.JEL Classifications: D21, D43, D60, D82, L13, L24, O34, O38, Q16, Q18DOI: https://doi.org/10.32479/ijefi.11544
Highlights
The self-pollinating nature of some crops makes crop research output non-excludable and R&D investment in plant breeding industry considerably different from other sectors
To explore the implications of the current policy options related to plant breeders’ rights (PBRs) and intellectual property right (IPR), we develop a duopolistic model of product competition to study the effect of different IPRs on firm and industry level R&D investment as well as on farmer and breeder surplus
The industry was modeled as either a monopolist or a few identical firms. This overlooks the impact of these policies on different types of firms when there are some levels of asymmetry among them
Summary
The self-pollinating nature of some crops makes crop research output non-excludable and R&D investment in plant breeding industry considerably different from other sectors. Another theoretical paper was developed by Moschini and Yerokhin (2007) to examine the impact of a researcher exemption to patent on the incentive of plant breeders to innovate In their Bertrand model, there exist two firms that initially have access to the same germplasm or stock of knowledge. A more recent study by Hervouet and Langinier (2015) examines the effect of a farmer exemption on the price of new varieties and on the breeders’ incentive for varietal development They model the breeding industry as a monopolistic firm. Together with the symmetric variation of our model, we conclude that breeders’ and society’s interest are aligned for a wide range of our model parameters and that when a research collaboration successfully functions as an effective mechanism to encourage R&D investment, breeders may voluntarily cross license their varieties or share their knowledge and the social planner’s prevention of such collaboration may lower firm- and industry-level R&D.
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