Technische Universität München Spatial aspects of the formation of GMO-free or GMO clubs Maarten J. Punt 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 2 © 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) 3

Technische Universität München 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 4

Technische Universität München 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 5

Technische Universität München Spatial set-up 6 GMO 1 GMO 2 Conventional 3 Conventional 4 GMO 5 α 13 α 53 α 24 α 23 α 14 α 54 Probability of affecting a conventional farmer = α ij

Technische Universität München Further assumptions 7

Technische Universität München Farmers decision: GMO farmers not liable 8

Technische Universität München 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 9

Technische Universität München Payoffs with club 10

Technische Universität München Potential Internal Stability 11

Technische Universität München Farmers decision: GMO farmers liable 12

Technische Universität München Payoffs with club 13

Technische Universität München Potential Internal Stability 14

Technische Universität München Some simulations 15 C 1 C 2 C 3 GM 4 GM 5 GM 6 ParameterSet 1Set 2 pCpC 100 (/tonne)200 (/tonne) pGpG 50 (/tonne)150 (/tonne) c 1,2,3 20 (/tonne)10 (/tonne) c 4,5,6 40 (/tonne)150 (/tonne)

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Technische Universität München Stable conventional clubs (set 1) 17 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

Technische Universität München Stable GM clubs (set 2) 18 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

Technische Universität München 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 19