augment their product lines in novel ways. For example, Monsanto and AgrEvo have pursued development of herbicide-tolerant crop varieties as a means of enhancing sales of their chemical herbicides.

Third, agrichemical companies' interest in transgenic crops might have been spurred by deceleration in the introduction of new chemical pesticides. The number of new chemical pesticide products registered provides a rough measure of R&D productivity in the years preceding registration. If the average number of products registered per active ingredient remains constant over time, then the number of new products registered will be proportional to the number of new active ingredients introduced into the market. The numbers of new chemical herbicide, insecticide, and fungicide formulated products registered have been lower on average in recent years than in the past (figure A.2). The average annual number of new formulated products of each type introduced in 1990-1998 was about half the average during each of the 2 preceding decades.

Fourth, regulation of chemical pesticides under FIFRA and public controversies over the use of pesticides may have made investment in transgenic crops more attractive. In 1993, EPA estimated that meeting data requirements for registering a chemical pesticide cost $10.6 million; that corresponds to a cost of $11.7 million in 1998 dollars. Meeting data requirements for transgenic pest-protected plants, by contrast, has been estimated to cost between $0.07-1.17 million in 1998 dollars, depending on the source of the pesticidal substance, the presence of wild relatives in the United States, and the extent of information available on the characteristics and function of the gene(s) introduced (EPA 1994d). Currently commercialized transgenic pest-protected plants feature more efficient targeting of pests than chemical pesticides and thus have the potential for less-extensive offsite and nontarget impacts.

The wave of consolidation has raised two kinds of economic concerns about potential loss of competition. First, increased concentration might allow firms in the agricultural-supply industry to exert market power, reducing farm income and increasing food prices. Second, increased concentration might lead firms to reduce R&D and thus dampen growth in agricultural productivity. The principal incentive for reducing R&D is to protect sales of existing products. Just and Hueth (1997), however, have noted that the opposite incentive holds when new products are complements of existing ones. In that case, new products increase demand for existing ones, so that introducing them leads to increased profit. As a result, firms with market power might engage more heavily in R&D than firms in a more competitive market would. Herbicide-tolerant crops are a good example of such a new product. Such crop varieties as Roundup Ready or Liberty Link corn or soybeans allow farmers to substitute



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