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Adverse Selection, Moral Hazard, and Grower Compliance with Bt Corn Refuge

  • Paul D. Mitchell
  • Terrance M. Hurley
Part of the Natural Resource Management and Policy book series (NRMP, volume 30)

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.

Key words

asymmetric information Compliance Assurance Program corn rootworm resistance management 

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Copyright information

© Springer Science+Business Media, LLC 2006

Authors and Affiliations

  • Paul D. Mitchell
    • 1
  • Terrance M. Hurley
    • 2
  1. 1.University of WisconsinUSA
  2. 2.University of MinnesotaUSA

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