Should old technologies be banned: the case of the organic food market

Abstract

In this paper, we focus on a market which consists of a large number of consumers, who share identical tastes but have different income levels; a large number of firms using old technology and a monopoly using high technology. We analyze the market effects of a ban on the use of low technology and show that it can lead to welfare improvements and it results in more firms producing high quality products using high technology. Specifically, we analyze the worldwide organic food market and propose that banning old technology (which corresponds to conventional methods used in agriculture, poultry and livestock) can be applied to this market as a viable policy considering its supply and demand properties. Broadening the perspective, we propose that in appropriate markets, banning old technology can lead to welfare improvements and should be considered as a policy option.