D

(e) When_EMlh > Eh, increase in the kill rate of the GMV will increase output. This likely condition reflects low and significantly declining marginal productivity of the pesticides (in absolute terms) at the optimal solution, and corresponds to a low price of the pesticides relative to output.

. It suggests that when the efficacy of the GMVs in

{E^DE\ +EM1h) \ Xi Xi , controlling pests is declining and, thus, leads to increased use of pesticides, the gain in output because of the extra pesticides does not compensate loss of output because of reduced pest control efficacy of the GMVs. The analysis suggests that when EM{h < Eh, reduction of pest control efficacy of

Xj Xi the GMV will lead to increased production.

The introduction of GMVs to replace a traditional technology leads to a significant reduction of Bt. Assuming that under both traditional varieties and GMVs EM,h > Eh., the introduction of a GMV leads to an increase in

Xi Xi output. When the traditional variety is replaced by a generic GMV, the lower Bj will lead to increased output, but the lower yp will contribute to a reduced production, and the net effect though is not clear a priori.

1.3 Conditions under which pesticide use is zero <5; =0,xj =0

The analysis thus far assumes positive application of pesticides with both varieties. That will not always be the case; some corner solutions with zero pesticides may be optimal. There are two situations where profit maximization results in zero use of pesticides with a seed variety. These situations occur when:

(a) Even the smallest amount of pesticide use does not generate sufficient benefits to cover the price. Specifically, w>-p-—(M?,/i(0)).

(b) The gain from pesticide use does not cover its fixed application cost. In these situations if the internal solution where (3) is met, it may not result in extra revenues that will cover both the fixed and variable cost of the pesticides, or pyf D(n)~ D^NB^x- Jj

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