Journal Article

Measuring Returns to an Innovation in an Imperfectly Competitive Market: Application to Mechanical Harvesting of Processing Tomatoes in Taiwan

Shu-Yu Huang and Richard J. Sexton

in American Journal of Agricultural Economics

Published on behalf of Agricultural and Applied Economics Association

Volume 78, issue 3, pages 558-571
Published in print August 1996 | ISSN: 0002-9092
Published online August 1996 | e-ISSN: 1467-8276 | DOI: https://dx.doi.org/10.2307/1243274
Measuring Returns to an Innovation in an Imperfectly Competitive Market: Application to Mechanical Harvesting of Processing Tomatoes in Taiwan

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  • Technological Change; Research and Development
  • Agricultural Economics
  • Market Structure, Firm Strategy, and Market Performance

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In this paper we develop and apply a general imperfect competition model to evaluate returns to a cost-reducing innovation. Most related work has applied models of perfect competition. Results demonstrate that welfare estimates derived from a model of perfect competition may be seriously distorted when the relevant market is imperfectly competitive. Application to mechanical harvesting of processing tomatoes in Taiwan reveals the potential for significant benefits to adoption of mechanical harvesting in Taiwan. However, farmers' incentives to adopt the harvester are attenuated because total benefits are reduced by oligopsony power in tomato procurement, and imperfectly competitive processors will capture a large share of the benefits that remain.

Keywords: imperfect competition; oligopsony; processing tomatoes; Taiwan; tomato harvester; welfare analysis; L130; O310; Q120; Q160

Journal Article.  0 words. 

Subjects: Technological Change; Research and Development ; Agricultural Economics ; Market Structure, Firm Strategy, and Market Performance

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