Cost-reducing Technology Research Articles

Information expropriation and moral hazard in optimal second-source auctions

Government mandated technology transfers from the developer of a product to a second source offer a potential gain of reduced information rents and procurement costs. To provide appropriate incentives, technology must sometimes be transferred even when the second source is less efficient than the first. Additionally, when developer moral hazard exists with respect to investments in cost-reducing technology, the optimal auction will make the developer's success in the auction more sensitive to the developing firm's announced costs.

Simultaneous signaling through investment in an R& D game with private information

We analyze an R&D game of two-sided incomplete information in which firms can invest in cost reducing technology before engaging in Cournot competition. Investment is observable, but R&D outcomes are not. We focus on partial pooling equilibria in which high cost firms mimic the strategy of low cost firms, resulting in under investment in equilibrium. These equilibria generally involve mixed strategies with the novel feature that players are not indifferent among their mixed strategies due to the beliefs and subsequent actions they induce. Further results suggest that firms may be willing to pay to keep their R& D outcomes concealed.

Technology adoption under price uncertainty

The paper examines the impact of changes in the variance of output prices on the bias and intrafirm diffusion rate of technological change. The results indicate that a reduction in the variance of output prices will increase the rate of adoption and the intrafirm diffusion speed of yield-increasing technologies. The opposite is true for cost-reducing technologies.

Economic and social perspectives on new irrigation technology

This paper considers whether now is an appropriate time to invest in irrigation given that the technical performance of many irrigation schemes is below standard and that the outlook for agricultural markets looks bleak. Agricultural producers, in developing countries and elsewhere, are on a technological “treadmill” where falling commodity prices force the adoption of cost reducing technology such as new irrigation schemes or new methods of irrigation. However, there are many problems that are associated with the introduction of new technology. Some problems are not caused by the technology itself but by a failure to understand fully pertinent institutional issues. A call is made, therefore, for a higher socio political input into planning of new irrigation projects.

Low‐Input Agriculture: Trends, Goals, and Prospects for Input Use

Low-input agriculture (LIA) has reemerged as an issue of the day. It was last a topical issue during the 1970s energy crisis, when the focus was on reducing our reliance on petroleumbased inputs (Klepper et al.). LIA's current popularity is similarly motivated but supported by growing evidence of environmental and health risks from agrichemicals. The drop in commodity prices and farm equity value which occurred between 1981-87 has rekindled interest in developing cost-reducing technologies. Accumulated evidence on groundwater quality effects of nitrogen fertilizer and pesticides (Nielsen and Lee) has triggered numerous state and federal proposals and administrative actions with respect to agrichemicals and the environment. Concerns about costs of production and environmental effects are formalized in a recent U.S. Department of Agriculture (USDA) statement which supports research and education on alternative farming systems that decrease or optimize the use of purchased inputs and that can increase net cash returns . . . through decreased costs of production (and) may effectively improve the competitive position of the farmer and decrease the potential for adverse environmental impacts (USDA). We question whether widespread employment of systems that concurrently meet these multiple objectives can occur under existing technology, farm policy, and economic conditions. Our argument rests on two basic assumptions: profit maximization is a strong motivation for production decisions, and externality issues are the driving force for public ncouragement of intervention to selectively reduce purchased input use. We hypothesize that current high demand for agrichemicals coincides with profit-maximizing levels of input use. To the extent that empirical evidence supports this hypothesis, the real debate involves the forms of intervention available to internalize externalities.

Incentives to Introduce A Cost Reducing Technology In A Decentralised Organisation

Incentives to Introduce A Cost Reducing Technology In A Decentralised Organisation

Impacts of Emerging Technologies on Food and Agricultural Productive Capacity: Discussion

In the last ten years, a virtual explosion of research has occurred. Recombinant DNA methodology has become almost commonplace as a tool for both basic and applied research. A major initiative of the Committee on Biotechnology of the Division of Agriculture, National Association of State Universities and Land Grant Colleges, was the advent of a USDA Competitive Grants Program for which provided substantial new resources for agriculturerelated research. The National Science Foundation and National Institutes of Health provided even larger funding increases during this period. The Experiment Station Committee on Organization and Policy (ESCOP) as well as the National Agricultural Research Committee and overall Joint Council have consistently placed at the top of the list of priorities for new initiatives for the last several years. The close relationship between the work that is occurring in the base program of the land grant institutions and the proposed new initiatives for which new funds are being sought will continue in the coming decade. While considerable effort will necessarily be devoted to basic methodological development in biotechnology, the research will also encompass the prioritied new initiatives identified for 1986-96 in the ESCOP plan (1987), which include those identified by Phillips and Lu. In addition to the information technologies identified by Phillips and Lu, one of the emerging new opportunities is the application of artificial intelligence in the development of expert systems for decision making in production agriculture and agribusiness. The management of complex agricultural production systems in an uncertain, risky environment requires greater information and more timely co trol than has been typical of agricultural management in the past. The power of modern computers and communications technology is being harnessed to the problems of improving management in all areas of producing a crop. Expert systems is a branch of artificial intelligence that is already paying dividends in applications to crop management systems. Phillips and Lu view the primary impact of adopting these new technologies as an increase in the productive capacity of agriculture through (a) increased yields, (b) increased natural resource base, and (c) increased percentage of planted acreage harvested. The basis for these conclusions is not provided. The yield projections stem primarily from judgments by panels of predominantly biological scientists in each commodity area. The analysis does not focus on reductions in costs of production through substitution of biotechnology inputs for capital-intensive industrial inputs, e.g., fertilizers, pesticides, drugs, etc., in the production process. Biological scientists generally are not comfortable in projecting cost decreases due to new technology, and economists have fared little better in ex ante estimations of technologically induced cost changes. Nevertheless, many of the biotechnologies and information technologies are more likely to have a direct impact on the cost structure of production activities. Certainly most cost-reducing technologies are also output increasing in the presence of significant ec nomies-to-size in production and through the adoption process whereby the large-scale producers are the early adopters. However, to fully assess the potential impacts on the competitiveness of U.S. agriculture, changes in the industry cost functions will have to be estimated. Such assessments are more difficult to B. R. Eddleman is a professor and Resident Director for Research, Texas A&M University Agricultural Research and Extension Center, Corpus Christi.

Regional resource depletion and industry activity: The case of oil and gas in the Gulf of Mexico

Stable and declining oil and gas prices have changed the industry's price expectations and, along with depletion of promising exploration prospects, has resulted in reduced exploration. Even with intensive additional exploration, production in most U.S. areas is expected to decline. What does this imply for the drilling and petroleum industry suppliers in particular regions? How should planners in government and the private sector project and incorporate the consequences of these changes in their strategies? This paper answers these questions for the industry operating in the offshore Gulf of Mexico. Future oil and gas production, as well as demand for offshore drilling and production facilities, are shown to depend on the size distribution of undiscovered fields, their associated production costs, and oil and gas prices. Declining well productivity is a consequence of development of progressively smaller fields so that long-run drilling demand should not decline in proportion to the expected production decline. Calculations show a substantial payoff to the drilling industry, in terms of potential demand increases, if it can develop and implement cost reducing technologies. Implications of these results for other offshore producing areas such as the North Sea are also discussed.

Lognormal field size distributions as a consequence of economic truncation

The assumption of lognormal (parent) field size distributions has for a long time been applied to resource appraisal and evaluation of exploration strategy by the petroleum industry. However, frequency distributions estimated with observed data and used to justify this hypotheses are conditional. Examination of various observed field size distributions across basins and over time shows that such distributions should be regarded as the end result of an economic filtering process. Commercial discoveries depend on oil and gas prices and field development costs. Some new fields are eliminated due to location, depths, or water depths. This filtering process is called economic truncation. Economic truncation may occur when predictions of a discovery process are passed through an economic appraisal model. We demonstrate that (1) economic resource appraisals, (2) forecasts of levels of petroleum industry activity, and (3) expected benefits of developing and implementing cost reducing technology are sensitive to assumptions made about the nature of that portion of (parent) field size distribution subject to economic truncation.

A Note on Shifts in Parity, Poverty, and Sources of Farm Family Income in North America

By world standards, the agricultural: nonagricultural transition in North America is relatively complete. Like early manufacturing with its small shops, farms that have failed to adopt labor economizing and cost-reducing technology are being squeezed out, bought up, or amalgamated. Today's farm sector is increasingly characterized by progressive farmers who operate larger, more well-to-do farms, are managerially more adept at adopting cost-reducing technology, are more financially able to risk recent innovations, and have greater access to required credit for purchase and implementation. Of course, economic growth and technology continue to condition North American input and output objectives at a pace that eludes the capacity of many farmers to adjust. By reducing the nonfarm capital to labor price ratio, economic growth compels farmers to adjust to the new price ratios by using new forms of capital and less labor. By tipping the output demand balance, technological advances often result in disequilibrium in the form of low-parity (price) ratios and lower returns to farm resources in general. Thus, in one form or another, the familiar cost-price squeeze tends to remove those on the margin, with the result that disequilibriums in the parity of returns to agricultural and nonagricultural labor and capital progressively narrow. The purpose of this note is to chart progress in this transition process over the last few decades in terms of (a) narrowing of the farm: nonfarm income gap, (b) reduction in poverty levels and income inequality, and (c) shifts in sources of income that herald an important