Corporate Pricing Strategies with Heterogeneous Adopters : The Case of Herbicide-Resistant Sugar Beet

Abstract

In ex-ante impact assessment of proprietary seed technologies, the assessor operates under scarce and imperfect data. No market has been established for the new technology and adoption has yet to take place. Recently, the scholarly literature has focused on the importance of accounting for heterogeneity among potential adopters to avoid homogeneity bias in the impact estimates. In this article, we argue that incorporation of heterogeneity in the corporate pricing strategy of the innovation is also needed to avoid a second bias in the welfare estimates -- pricing bias. Therefore, a framework is developed which explicitly incorporates heterogeneity of proprietary seed technology valuation among adopters in both the pricing decision and the impact assessment. The results explain the tendency of innovators to engage in third-degree price discrimination if the market structure discourages arbitrage. Finally, the model is applied on the case study of herbicide-resistant sugar beet in the EU-27.