Estimating the Demand for a New Technology: Bt Cotton and Insecticide Policies

Abstract

This article examines the potential demand for Bt cotton in the Southeast from information gathered in the first year of commercialization. We combine revealed preference (RP) data on adoption of Bt cotton varieties with stated preference (SP) data on willingness to adopt to estimate demand using a double-bounded maximum likelihood procedure. Using estimated demand equations, we simulate the costs of reducing conventional insecticide applications through subsidization of Bt cotton. Results indicate that reducing cotton insecticide applications by 40% in the Southeast would require a $21/acre subsidy, with total annual program costs between $53 million and $60 million.

JEL Classification: Q12