An Economic Framework for Evaluating New Wheat Varieties

Abstract

Estimation of the benefits of research using changes in producer and consumer surplus following a research-induced shift in the supply curve provides a useful framework for the analysis of new wheat varieties. However, the framework assumes an homogeneous product, which is not the case for wheat where there are changes in quality as a result of research. This aspect is particularly important where there is a trade-off between quality and yield, as in the case of a higher-yielding, but lower-quality wheat variety. The aim of this paper is to incorporate these quality aspects into an analysis based on a partial equilibrium framework by separating the wheat market into segments based on wheat quality. A change in the type of wheat produced can then be represented as a shift from one segment to another. The analysis involves identifying those who will produce the new variety, and defining supply curves for those producers and other producers separately. Empirical testing of the model with hypothetical varieties indicates that the results obtained are consistent with prior expectation.

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