Doing well by doing good: agricultural biotechnology in the fight against hunger

A recent FAO report estimates that more than 800 million people around the world have been facing malnutrition and hunger. This article develops a simple, empirically relevant multimarket framework of heterogeneous consumers and an imperfectly competitive innovating firm to analyze the profit-maximizing strategies of innovating firms in hunger-stricken areas of the world. The analysis shows that, when the association of the GM technology with malnutrition and hunger reduction in food insecure areas of the world decreases consumer aversion to the GM technology in the rest of the world, the innovating firm can find it economically optimal to reduce its price and increase consumer access to nutritious food in these hunger-stricken areas. When the impact of hunger reduction on consumer attitudes toward the GM technology is relatively strong, the firm will find it optimal to offer its GM technology in the hunger-stricken areas for free as its losses in these areas are more than compensated by its gains in the rest of the world. This result is in contrast with the standard assumption of innovators' desire to exercise the market power conferred by their intellectual property rights and provides some analytical support to the strategic corporate social responsibility (CSR) hypothesis.