Argentina's economy
is organized mainly around the export of transgenic soybeans. This production
is associated with several environmental and social costs. This article
investigates transgenic soybean production regulation possibilities, which
fulfills efficiency, acceptability, and feasibility by directly controlling
production levels. Production quota markets are promising because they make it
possible to implement cost-effective production. However, Argentina's
agricultural sector is organized into large agro-associations with significant
political power. The exercise of market power could challenge the attractive
properties of production quota markets. This article considers the possibility
of these organizations manipulating the quota market to capture a larger share
of production. The production quota market could give rise to "raising
rivals' costs" behavior. Contrary to the existing literature, this article
shows that this strategy is profitable, even though the price of transgenic
soybeans is fixed on international markets. To restore efficiency in production
levels while preserving policy acceptability, we propose to auction production
quotas with an adequate rebate revenue. Alternatively, initial quota allocation
can be hybrid. The initial allocation chosen will depend on the trade-off
between efficiency and acceptability of the environmental policy. Thus, while
proposing a specific and adapted regulation for transgenic soybeans in
Argentina, this article contributes to the knowledge of tradeable production
quotas, which are almost less analyzed in the economic literature.
