GMO Testing Strategies and Implications for Trade: A Game Theoretic Approach

Since their commercial introduction in 1996, genetically modified (GM)crops have been quickly adopted world wide, but some GM crops/varieties have notreceived regulatory approval for use in some importing countries, leading toasynchronicity in regulatory approvals. In this context, the international agriculturaltrade relied on analytical GMO testing which is a statistical process, along with identitypreserved systems to segregate GM and non-GM crops. This led to a situation wheremeasurement uncertainty became an important issue as it can lead to potential holdups atthe point of import. In this background, this paper examines the implications ofmeasurement uncertainty associated with GMO testing on the behavior of importers andexporters in a game theoretic framework. The results indicate that relative size ofidentity preservation costs, testing and rejection costs, the premiums offered in the non-GM markets and measurement uncertainty all have direct impacts on the behavior ofimporters and exporters.