State-Contingent Demand for Herbicide-Tolerance Seed Trait

Abstract

Suppose a farmer had to apply a herbicide pre-emergence or not at all. The advent of a herbicide-tolerance trait innovation then provides the option to wait for more information before making a state-contingent post-emergence application. This option to wait can increase or decrease average herbicide use. for heterogeneous acre types, trait royalties increase with the level of uncertainty about the extent of weed damage. Royalties are largest when acre infestation susceptibility types are bunched around the type indifferent to applying the herbicide in the absence of the trait. The trait complements (substitutes for) information technologies that facilitate informed post-emergence (pre-emergence) decisions.

Keywords

• genetics
• information inputs
• patent value
• post-emergence
• real option