Precision Cotton Agriculture and Strategic Commercial Policies: An Analysis in Terms of Duopoly by Quality

Baldin, Claire (2011) Precision Cotton Agriculture and Strategic Commercial Policies: An Analysis in Terms of Duopoly by Quality. Economic analysis, 44 (1-2). pp. 78-97. ISSN 1821-2573

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Abstract

We study a Hotelling’s duopoly in world cotton market to examine the effects of Precision Agriculture’s (PA) adoption in term of strategic international trade between the United‐States and Central and West Africa (CWA). We prove that US producers should be well advised to adopt PA to offer “environmental quality” cotton whereas CWA producers have a natural comparative advantage that allows them to offer a “product quality” cotton. We also argue that if the USA subsidizes PA in order to protect environment, this measure can be considered as a strategic international policy. We determine a critical subsidy level, which ousts CWA producers from the cotton market. At this subsidy level, US policy can be thought of unfair even if this policy enables them to improve the environment.

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