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Abstract Seed is the one of the most costly components of potato production in developing countries. Since potato is a vegetatively reproduced crop, diseases such as viruses build up and yield declines as tubers are saved from one harvest for use as seed the next season. Replacing farm‐saved seed with clean seed is one means to increase yield, but information asymmetry between buyers and sellers on seed quality may restrict market supply of this input. In this article we develop a model of the seed market in which clean seed is treated as a capital good providing benefits over several seasons. To determine farm demand for clean seed, we conducted a survey of 182 potato farmers in the major potato growing areas of Indonesia to elicit their perceptions of seed quality from different sources, and derive farmers' “willingness‐to‐pay” for quality potato seed. Results indicate that the effects of information asymmetry on seed supply may be partially offset by the “reputation” of specialized seed producers. Nevertheless, marginal returns to disease‐free seed appear to significantly exceed marginal costs, indicating that improving supply of quality seed will contribute strongly to productivity growth in potato. We discuss several policy options to encourage supply and utilization of quality potato seed.
Fuglie et al. (Wed,) studied this question.