When:
Tuesday, February 27, 2024
1:15 PM - 2:15 PM CT
Where: Kellogg Global Hub, L110, 2211 Campus Drive, Evanston, IL 60208 map it
Audience: Faculty/Staff - Post Docs/Docs - Graduate Students
Contact:
Mariya Acherkan
(847) 491-5213
Group: Department of Economics: Industrial Organization Lunch
Category: Academic
Speaker: Felipe Berrutti
Title: "And The Cotton Is High: Vertical Integration, Prices and Quality in Seed Markets"
Vertical integration has an ambiguous theoretical impact on total welfare. I empirically study this issue in the context of a vertical merger in the market for genetically engineered (GE) cotton seeds in the United States. I provide descriptive evidence that following Monsanto's 2007 acquisition of a leading cotton seed firm, seed prices increased, but not relative to markets unaffected by the merger. Additionally, input prices increased 18%. I show that this increase was stronger for downstream rivals of the merged firm. Finally, I document that (i) Monsanto's innovative effort increased after the merger relative to rival firms and (ii) yields of rival firms' new products were 15% lower than those of the downstream brand of the merged firm. In order to quantify the welfare impacts of these trends, I develop and estimate a demand model. I then use a simplified supply model to estimate the welfare impact of novel divestitures required by the DOJ to approve the merger. Preliminary results indicate that divestitures increased welfare by 0.5%.