Technische Universität München

Spatial aspects of the formation of GMO-free or GMO clubs

Maarten J. Punt

Technische Universität München

Technische Universität München

Introduction

• Ruling of the ECJ: Pollen is an ingredient of honey (September 2011)

• Ruling fueled the coexistence debate

• ECJ does not settle liability

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© M. M. Karim

Technische Universität München

Coexistence

• Several ways of dealing with coexistence

• Ex ante:– Spatial segregation (e.g. isolation distance, buffer zone)– Temporal segregation (e.g. sowing, harvest)– Information requirements

• Ex post:– Liability (essentialy property rights)

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Prevention of liability issues through adventitious presence

• Possible measure: form GMO-free or GMO-only regions

• If GMO farmers are liable ->

GMO-only regions

• If GMO farmers are not liable ->

GMO-free regions

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Paper setup

• Do farmers have incentives to form GMO-free or GMO-only regions given liability and adventitious presence?

• Club formation– Incentives to join the club– Incentives to leave the club– Stable club: no-one has an incentive to join or leave the formed

club

• Open membership: anyone can join or leave

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Spatial set-up

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GMO 1

GMO 2

Conventional 3

Conventional 4

GMO 5

α13

α53

α24

α23

α14

α54

Probability of affecting a conventional farmer = αij

Probability of no adventitious presence in

conventional fields =

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Further assumptions

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• There is a price premium for conventional crops

• There is a cost advantage for GM crops

• Each farmer owns a single field

• A single club can form with open membership– GMO free or GMO only type depends on liability regime– Minimum number of “original type” = 2

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Farmer’s decision: GMO farmers not liable

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• Expected payoff of conventional crops:

• Payoff of GM crops:

• Choose conventional crops if and GM crops otherwise

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Club formation

• Form club and pool profits• Compensate GMO farmers to farm conventional

• Internal stability: No farmer wants to leave the club• External stability: No farmer wants to join the club

• Stability depends on the sharing rule.

• Potential internal stability: the club profits exceed the outside option payoffs

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Payoffs with club

• If a club with S members forms the profits of the club are:

• All conventional farmers outside the club receive:

• Note that • All GM farmers outside the club receive

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Potential Internal Stability

• Outside option payoff of a conventional farmer: • Outside option payoff of a GM farmer

• The payoff to a conventional farmer is always less in the club then outside the club!

• Exception: if two conventional farmers are left• GM farmers are willing to join the club as long as

enough compensation is paid

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Farmer’s decision: GMO farmers liable

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• Payoff of conventional crops:

• Expected payoff of GM crops:

• Choose conventional crops if and GM crops otherwise

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Payoffs with club• If a club with T members forms the profits of the club are:

• All conventional farmers outside the club receive:

• All GM farmers outside the club receive:

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Potential Internal Stability

• Outside option payoff of a conventional farmer:

• Outside option payoff of a GM farmer • The payoff to a GM farmer is always less in the club

then outside the club!• Exception: if two GM farmers are left• Conventional farmers are willing to join the club as long

as enough compensation is paid

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Some simulations

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C 1

C 2

C 3

GM 4

GM 5

GM 6

Parameter Set 1 Set 2

pC 100 (€/tonne) 200 (€/tonne)

pG 50 (€/tonne) 150 (€/tonne)

c1,2,3 20 (€/tonne) 10 (€/tonne)

c4,5,6 40 (€/tonne) 150 (€/tonne)

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Stable conventional clubs (set 1)

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C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

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Stable GM clubs (set 2)

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C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

C 1

C 2

C 3

GM 1

GM 2

GM 3

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Summary & Conclusions

• Investigate feasibility of GM-free or GM-only clubs– Open membership– Cartel stability model of club formation– Different liability regimes

• The maximum number of club initiators is 2• Conventional clubs are easier to form

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