Thursday, January 14, 2010

Antitrust Questions for Monsanto

New York Times article "Antitrust Questions for Monsanto" (January 14th, 2010) offers a piece of information that is not necessarily useful at all, though is often mistaken to be. The article speaks about a possible antitrust suit against Monsanto agricultural company because of its genetically modified soybeans. It notes market share:

Including seeds made by licensees, about 93 percent of soybean plantings last year contained Monsanto’s Roundup Ready trait.

The relationship between market share and monopoly is a tenuous one indeed. A company can have 100% market share for all soybeans and still not have a monopoly, because of the threat of entry. That is, if they raised the price even slightly, a slew of competitors could come in and it would lose all business. Market share does not equal market power.

Indeed, it isn't even necessary for market power--only being the marginal producer is required.

We might add that while it may have a monopoly over soybeans, it may not be able to generate any inefficiency or extra profits from that monopoly due to agricultural substitutes to soybeans.

1 comment:

  1. Monsanto has advanced plant science to an extraordinary degree. For example, the roundup ready crops require far less administration of insecticides to a region than use of conventional crops. Monsanto has produced a superior product. No surprise usage is high. This is not monopolistic behavior - there is no effort to suppress competitors - rather Monsanto is doing exactly what they should be doing by creating great products that have been an important part of a green revolution that has avoided the massive famines in the third world long anticipated before the Monsanto innovations. Monsanto is to the agriculture sector what Apple is to the consumer electronics sector and round up ready crops are to routine seeds what iPhones are to old style cell phones.