Charging for the use of plant varieties

Private and many publicly funded plant breeding organisations charge farmers for use of varieties they develop. This article compares four alternative charging mechanisms and outlines responses to these alternatives by farmers and plant breeders. Risk-averse farmers and breeders are shown to have opposite preferences for charging mechanisms. Results suggest profit-based or ad valorem royalties are preferred by farmers whereas breeders prefer area or tonnage-based royalties. Risk-sharing arrangements between both parties could lead to an overall preference for profit-based or ad valorem royalties. However, this finding is subject to important caveats and practical limitations.