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Abstract
Herbicide prices differ between Canada and the United States. Price disparities may be symptoms
of the different pesticide regulatory systems between the two countries. The price diferences
may be due to the size of the respective pesticide markets or different business environments.
Traditional economic theory states that price is determined by supply and demand. For the prices
to remain different, the two markets must be segregated by some barrier. If not, arbitrage will
occur and eliminate the price differences. An international border with trade restriction provides
an excellent barrier. The price difference between the two countries costs North Dakota producers
over $20 million annually. Higher herbicide costs in North Dakota raised total pesticide
expenditures about 8.3% and total crop expenses by 2.3% in 2002. Differences in the economic
structure of the two countries provide the incentive for different prices, but market segregation
is required for successful price discrimination. Therefore, to eliminate price disparities, the U.S.
and Canadian herbicides markets must be de-segmented.