Incentives to Reduce Crop Trait Durability

To reduce the competition from farmers who self-produce seed, an inbred line seed producer can switch to nondurable hybrid seed. In a two-period framework, we first investigate the impact of crop durability on self-production, pricing and switching decisions. Second, we study how the introduction of a fee paid by self-producing farmers affects those decisions. We find that the monopolist may produce technologically dominated hybrid seed in order to extract more surplus from farmers. Further, the introduction of a self-production fee improves efficiency.