Abstract
We develop a principal-agent model of grower compliance with Bt corn refuge requirements for managing insect resistance to the Bt toxin. The model endogenizes the technology price, audit rate, and fine imposed on non-complying growers when grower willingness to pay for Bt corn and compliance effort is private information. Empirical analysis finds that practical application requires capping fine revenue. With such a program, the company raises the technology price and achieves complete compliance. The net welfare change (relative to competitive pricing) due to reducing company revenue and restricting technology access remains beyond the scope of this analysis.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsPreview
Unable to display preview. Download preview PDF.
References
Agricultural Biotechnology Stewardship Technical Committee. 2002. “Insect Resistance Management Compliance Assurance Program: Backgrounder.” Available online at http://www.ncga.com/public_policy/PDF/CAPbackgrounder.pdf (accessed March 8, 2005).
Babcock, B.A., E.K. Choi, and E. Feinerman. 1993. “Risk and Probability Premiums for CARA Utility Functions.” Journal of Agricultural and Resource Economics 18(1): 17–24.
Babcock, B.A., C.E. Hart, and D.J. Hayes. 2004. “Actuarial Fairness of Crop Insurance Rates with Constant Rate Relativities.” American Journal of Agricultural Economics 86(3): 563–575.
Chiang, A. 1984. Fundamental Methods of Mathematical Economics (3rd edition). New York: McGraw-Hill Publishing Company.
Coble, K., R. Heifner, and M. Zuniga. 2000. “Implications of Crop Yield and Revenue Insurance for Producer Hedging.” Journal of Agricultural and Resource Economics 25(2): 432–452.
Cullen, E. 2004. “Southeast Wisconsin Variant Western Corn Rootworm Trapping Results 2004.” Wisconsin Crop Manager 11(28): 200–204. Available online at http://ipcm.wisc.edu/wcm/ (accessed March 8, 2005).
Goodwin, B.K., and A.P. Ker. 2002. “Modeling Price and Yield Risk.” In R.E. Just and R.D. Pope, eds., A Comprehensive Assessment of the Role of Risk in U. S. Agriculture. Boston: Kluwer Academic Press.
Hurley, T.M., B.A. Babcock, and R.L. Hellmich. 2001. “Bt Corn and Insect Resistance: An Economic Assessment of Refuges.” Journal of Agricultural and Resource Economics 26(1): 176–194.
Hurley, T.M., P.D. Mitchell, and M.E. Rice. 2004. “Risk and the Value of Bt Corn.” American Journal of Agricultural Economics 86(2): 345–358.
Jaffe, G. 2003a. “Planting Trouble: Are Farmers Squandering Bt Corn Technology?” Center for Science in the Public Interest, Washington, D.C. Available online at http://cspinet.org/new/pdf/planting_trouble_update1.pdf (accessed March 8, 2005).
____. 2003b. “Planting Trouble Update.” Center for Science in the Public Interest, Washington, D.C. Available online at http://cspinet.org/new/pdf/bt_corn_report.pdf (accessed March 8, 2005).
Krysan, J.L., J.J. Jackson, and A.C. Lew. 1984. “Field Termination of Egg Diapause in Diabrotica with New Evidence of Extended Diapause in D. barberi (Coleoptera: Chrysomelidae).” Environmental Entomology 13(6): 1237–1240.
Laffont, J.-J., and D. Martimort. 2002. The Theory of Incentives. Princeton, NJ: Princeton University Press.
Langrock, I., and T.M. Hurley. 2006. “Farmer Demand for Corn Rootworm Bt Corn: Do Insect Resistance Management Guidelines Really Matter?” In R.E. Just, J.M. Alston, and D. Zilberman, eds., Regulating Agricultural Biotechnology: Economics and Policy. New York: Springer.
Levine, E., H. Oloumi-Sadeghi, and J.R. Fisher. 1992. “Discovery of Multiyear Diapause in Illinois and South Dakota Northern Corn Rootworm (Coleoptera: Chrysomelidae) Eggs and Incidence of the Prolonged Diapause Trait in Illinois.” Journal of Economic Entomology 85(1): 262–267.
Mason, C.E., M.E. Rice, D.D. Calvin, J.W. Van Duyn, W.B. Showers, W.D. Hutchison, J.F. Witkowski, R.A. Higgins, D.W. Onstad, and G.P. Dively. 1996. “European Corn Borer Ecology and Management.” North Central Regional Extension Publication No. 327, Iowa State University, Ames, IA.
Metcalf, R.L. 1986. “Forward.” In J.L. Krysan and T.A. Miller, eds., Methods for the Study of Pest Diabrotica. New York: Springer-Verlag.
Mitchell, P.D., M.E. Gray, and K.L. Steffey. 2004. “A Composed Error Model for Estimating Pest-Damage Functions and the Impact of the Western Corn Rootworm Soybean Variant in Illinois.” American Journal of Agricultural Economics 86(2): 332–344.
Mitchell, P.D., T.M. Hurley, B.A. Babcock, and R.L. Hellmich. 2002. “Insuring the Stewardship of Bt Corn: A Carrot Versus a Stick.” Journal of Agricultural and Resource Economics 27(2): 390–405.
National Corn Growers Association. 2003. “Survey Shows Corn Growers Good Stewards of Bt Technology.” News Direct from the Stalk (November 13). Available online at http://www.ncga.com/news/notd/2003/november/111303.htm (accessed March 8, 2005).
Ostlie, K.R., W.D. Hutchison, and R.L. Hellmich. 1997. “Bt Corn and European Corn Borer: Long-Term Success Through Resistance Management.” North Central Region Extension Publication 602, University of Minnesota, St. Paul, MN.
Schmitz, D. 2004. Iowa Crop Improvement Association, Ames, IA. Personal communication.
Tabashnik, B.E., Y. Carriere, T.J. Dennehy, S. Morin, M.S. Sisterson, R.T. Roush, A.M. Shelton, and J.-Z. Zhao. 2003. “Insect Resistance to Transgenic Bt Crops: Lessons from the Laboratory and Field.” Journal of Economic Entomology 96(4): 1031–1038.
U.S. Department of Agriculture. 2003. “Crop Production—Acreage—Supplement (PCP-BB).” National Agricultural Statistics Service, U.S. Department of Agriculture, Washington, D.C. Available online at http://usda.mannlib.cornell.edu/reports/nassr/field/pcp-bba/ (accessed March 8, 2005).
____. 2005. “Published Estimates Data Base On Line.” National Agricultural Statistics Service, U.S. Department of Agriculture, Washington, D.C. Available online at www.nass.usda.gov:81/ipedb/ (accessed March 8, 2005).
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2006 Springer Science+Business Media, LLC
About this chapter
Cite this chapter
Mitchell, P.D., Hurley, T.M. (2006). Adverse Selection, Moral Hazard, and Grower Compliance with Bt Corn Refuge. In: Just, R.E., Alston, J.M., Zilberman, D. (eds) Regulating Agricultural Biotechnology: Economics and Policy. Natural Resource Management and Policy, vol 30. Springer, Boston, MA. https://doi.org/10.1007/978-0-387-36953-2_27
Download citation
DOI: https://doi.org/10.1007/978-0-387-36953-2_27
Publisher Name: Springer, Boston, MA
Print ISBN: 978-0-387-36952-5
Online ISBN: 978-0-387-36953-2
eBook Packages: Biomedical and Life SciencesBiomedical and Life Sciences (R0)