Abstract
In this article, the authors report empirical measures of price mark-ups attributable to market power in the US seed industry between 1997 and 2008 -- a period characterized by the vertical integration of leading multinational biotechnology firms in this industry. They then calculate the revenues from the estimated mark-ups, compare them with approximate measures of aggregate R&D expenditures in the industry, and draw conclusions about their proportionality over the period of analysis. These results provide insight on the dynamic efficiency of the industry. R&D-driven industries tend to be concentrated, and the US seed industry is no exception. Concerns about the presence and use of market power in such industries are not rare since products are differentiated, which allows firms to set prices and charge mark-ups that can be used to pay for R&D investments and other fixed costs.
