Monsanto Company
Monsanto Company is a multinational and a public corporation in the agrochemical industry. The company produces seeds and supplies them to farmers for planting. Monsanto operates as a monopolistic company in the seed market. It supplies about 80% of all the corn seeds that are grown in the United States(Acquaye & Traxler 1). In fact, Monsanto produces terminator seeds whose harvest is unfertile. This implies that farmers will have to buy the sterilized seeds during each planting season.
Just like most monopolistic markets, Monsanto makes a lot of decisions without engaging in strategic behavior. Decisions made for instance in pricing, quality production and distribution are all in the hands of the monopoly (Filomeno 34). For instance, Monsanto produces and supplies genetically modified seeds to most farmers in the United States. Those that seek alternative seeds from the neighboring farms are harassed mercilessly because of the dominance of the Monsanto Company.
Monopolies also tend to have higher barriers of entry such that venturing into the industry is very hard. Since Monsanto dominated the seed market, no venture has survived in competing with it. In fact, Monsanto cracks down anyone who attempts to use the GMO seeds they produce (Filomeno 40). In addition, Monsanto sets the prices based on its own evaluation. It does not need to consider what other firms have set theirs because the industry is monopolistic.
The Monsanto Company uses the price discrimination strategy in the seed market to maximize their profits. Based on a laws and intellectual property rights, monopolies such as Monsanto have been allowed to sell their products at a price that is higher than the marginal cost (Filomeno 41). As a monopoly in cotton supply, Monsanto’s marginal profits have been analyzed and presented in the graph below.
Work Cited
Acquaye, Albert K.A., & Traxler, Greg. Monopoly Power, Price Discrimination, and Access to Biotechnology Innovations. The journal of Agrobiotechnology Management and Economics. AgBioForum. Retrived from: http://www.agbioforum.org/v8n23/v8n23a09-acquaye.htm
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Filomeno, Felipe A. Monsanto and Intellectual Property in South America. , 2014. Internet resource.
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