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Abstract

There exists much uncertainty about consumer attitudes towards genetically modified foods. If it happens that sufficient (insufficient) acres are planted under non-modified seed to meet post-harvest demand, then a price premium will not (will) emerge for the non-modified varieties. A non-linearity originates in the fact that a price premium may be supported. This non-linearity interacts with the extent of demand uncertainty to determine equilibrium varietal plantings and the probability that post-harvest varietal prices will differ. Also, as planting approaches signals will be received by growers about the nature of demand they will be planting into. We show how the non-linearity affects the order on the types of signals that risk-neutral growers will prefer to receive.

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