The economics of artificial insemination regulations in the equine breeding industry : monopoly versus transaction costs explanations

Abstract

Artificial insemination is a technological development that lowers the cost of producing livestock while providing a means for accelerating the development of genetic characteristics. The adoption of artificial insemination by the equine industry has been inconsistent across breed registries and varied over time. The question arises as to why any registry would resist the introduction of a technology that lowers the cost of production. Identification of the characteristics that influence the decision by a breed registry to place restrictions on the use of artificial insemination will provide economic reasons to explain why the restrictions exist. Various explanations are hypothesized to provide a basis for empirical models. Regression analysis is run to test for the significance of the following factors; opportunistic behavior, monopoly power, and the importance of relative versus absolute performance. It is established that all three factors contribute to a registry's decision whether or not to impose restrictions on the use of artificial insemination. There are two separate conclusions drawn from the results. Where opportunistic behavior (i.e. cheating) generates rewards not otherwise attainable, artificial insemination will be restricted. Where relative performance matters and a breed is able to exert monopoly power, artificial insemination will be restricted.