WEEK 4: Technology adoption

Question 1

What are the decisions about technology adoption

Answer 1

producers are faced with myriad new technologies and typically yhr choise of adoption is driven by a cost to benefit ratio that considers time

important: technologies are more likely to be adopted if costs are smaller up front and/or revenue/yields can be increased over time or revenues can be earned earlier

some technologies also have the capacity to increase quality

Question 2

New Varieties

what is the bayh doyle act of 1980

Answer 2

CU has released many apple varieties over the past
100 years (e.g., Empire, Cortland, Jonagold,
Autumn Crisp, and Macoun)
* These varieties were all released to the public for
FREE (and CU often measured their success by
the rate of adoption among apple growers)
* Now we are shifting to a new model, and much of
this can be attributed to the** Bayh-Dole Act of
1980** that gave university researchers the ability to
apply for patents on their scientific discoveries.

Question 3

How are licenses priced

Answer 3

almost all new varieties now come with a $1 per tree royalty, and the most promising varieties come with both a tree royality and royalty on all fruit sold (in perpetuity)

to date, the pricing of these licenses has been done in an ad hoc way which consists of up-front fees ($1/tree or approx $1400 per acre)

and or ad valoren or per unit royalities on each box of fruit sold (~0 to 6%)

Question 4

Time Value of Money and discount rate

Answer 4

Producing food products (think milk or
apples) is a long-term decision that involves
costs and revenues over time
* The “time value of money” is an important
consideration in such decisions
* We prefer to receive $1 today rather than
receive it 10 years from now
* We also prefer to spend $1 in 10 years time
rather than spend it today

this is why Economists utilize the appropriate “discount
rate” to effectively remove the time value of
money in decision making
– The discount rate is used in calculating the Net Present
Value (NPV) for a stream of cash flows over time
* Employing the discount rate enables
managers to compare the overall profitability
of competing capital investments including a
comparison of competing technologies
The Discount Rate

annual flows

bottom of x axis shows cost and top shows revenue over time