Public, Producer, Private Partnerships and EPR systems in Australian Wheat Breeding

Australia has a crop research system with higher research intensity than exists internationally. Motivated to improve R&D policy in Canada, this dissertation focuses on the Australian End Point Royalty (EPR) system for wheat and addresses four principal questions: (1) How was the Australian system created and how does it work? (2) How do public, producer and private ownership of breeding programs affect the pricing of varieties? (3) How do EPR rates affect wheat variety adoption? (4) Finally, how would uniform EPR rates, similar to those used in France, affect variety selection, total production and revenue if used in the Australian market? In addressing the first question I use existing literature and interviews with prominent personnel in the Australian wheat breeding system, including management of InterGrain, AGT, DAFWA, GRDC and others. Interviews were conducted during field study in Australia in 2011. In addressing the second question I employ a horizontal location model to analyze three game theoretic scenarios of a two firm oligopoly market with private, public and producer owned-breeding companies. The results show public and producer ownership of one of the wheat breeding programs reduces price level relative to private only ownership. I derive a novel result showing that when competing with private firms who must price above marginal cost, the public firm should also price above marginal cost in order to maximize total industry surplus. In addressing the third question I develop and estimate an econometric wheat variety adoption model for Western Australia. I find EPR rates have a negative inelastic, statistically significant impact on the adoption of varieties. Finally, in addressing the last question, I use the econometric model to simulate the adoption of Australian wheat varieties, given a counterfactual of revenue neutral uniform EPR rates. The uniform EPR rates speed up both the adoption and dis-adoption of varieties, thereby increasing weighted average yield and total production. The value of the increase in value of production exceeds the revenue for breeders under varying EPR rates, suggesting uniform EPR system may be an attractive alternative to varying EPR rates