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Abstract

The paper develops a theoretical framework of heterogeneous consumers and producers to examine the market and welfare effects of the introduction of variety-level genetic use restriction technologies (V-GURTs) under the current No-Labeling regime of GMPs in the US market. Specifically, the study examines how the agronomic characteristics of GURTs, consumer perceptions and preferences regarding interventions in the production process (i.e., genetic modification) and producer cost structures (e.g., dependency on saving seed) affect the adoption of the technology by producers, the market acceptance of GURTs by consumers and consequently the innovator's incentive to introduce the new technology. Analytical results show that the introduction of GURTs may be welfare enhancing for consumers, producers and innovating firms when consumer aversion to GURTs is low, the agronomic benefits of the GURTs crop are high, and the expected penalty producers face when they cheat on their GM licensing agreements (e.g., due to inefficient or costly monitoring) is low.

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