Trait Bundling and Bundle Pricing
Seeds are sold at a list price less a discount available at the point of sale. GM seed prices vary
with trait stacking/bundling, perceived agronomic conditions in each region—pest infestations,
rainfall, etc.—availability of substitute seeds, commodity prices, and farmer income. For bundled
biotechnology traits in the corn seed market, Shi, Chavas and Stiegert (2010a) rejected standard
component pricing of biotech traits, where the price premium for multiple-stacked seeds would
be equal to the sum of the price premium for relevant single-trait seeds. They found strong
evidence of sub-additive bundle pricing, where the price of stacked seeds is sold at a discount
compared to component pricing. Similar results were obtained by Shi and Chavas (2010) in their
analysis of the soybean seed market, and by Shi, Stiegert and Chavas (2010) in the U.S.
cottonseed market. This evidence is consistent with the presence of complementarity and
economies of scope in the production of seeds with bundled traits. In general, sub-additive seed
pricing is good for farmers who want to have access to multiple traits, since it reduces their
access cost to these traits.
Using less aggregated data of the corn market, Shi, Chavas and Stiegert (2010b) and
Stiegert, Shi, and Chavas (2010) uncovered a more varied price discrimination pattern. The
former paper studied pricing at the biotechnology firm level, while the latter broke out the Corn
Belt into two regions: the core and the fringe. In both studies, sub-additive pricing is most
commonly observed. However, there was also limited evidence of super-additive pricing, where
the price of stacked seeds is sold at a premium compared to component pricing. Super-additive
pricing may be associated with firms taking advantage of market power to extract economic
gains from farmers. In Stiegert, Shi, and Chavas (2010), its occurrence appears closely tied to the
herbicide-tolerance trait and only in the core region. In Shi, Chavas and Stiegert (2010b), superadditive
pricing is found to be specific to the behavior of a single firm. Although limited in
scope, the presence of super-additive pricing implies that different pricing patterns may emerge
in ways that depend on specific market settings.