Section 3 is devoted to the analysis of the price equilibria, and the decision of the seed producer to protect his innovation with a PBR or a patent. [...] If the new seed is protected with a PBR, each farmer has a third option: to self-produce by saving part of the first-period harvest and replanting it in the second period, which generates a payoff φθπ with φ < 1. Self-producing farmers incurs a loss in productivity, which includes the cost of saving part of the harvest as well as the cost of the yield loss. [...] A fraction λ of the tax is paid back to the seed producer.15 The remaining (1− λ)τ corresponds to the cost of collecting the tax by the government. [...] Given the tax level and the investment decision, the seed producer chooses the new seed prices p1 and p2 for the two periods.16 We normalize the discount factor to 1. The timing of decisions is as follows. [...] In the second period, those who did not save part of their first-period harvest decide whether to buy the old or the new variety at price p2 and those who self-produce pay the tax τ. If the innovation is patented, each farmer decides to buy the old seed or the new seed during the first and second periods.