The Anticipated and Unanticipated Economic Effects of Persistent Plant Pathogens: The Case of Nematode Infestations in the U.S. Potato Industry

Abstract This paper analyzes the economic impact of plant-parasitic nematodes in the U.S. potato industry, focusing on how both unanticipated and anticipated yield losses affect producer decisions, market outcomes, and welfare. We use a modified Cournot model and estimate a system of supply and demand equations using Three-Stage Least Squares (3SLS). We simulate scenarios to measure how varying levels of nematode infestation influence producer profits and consumer surplus in the short-run and the long-run. Simulations suggest that reducing nematode damage could yield substantial gains in output and consumer welfare particularly in concentrated markets where strategic producer behavior amplifies these effects. Our findings underscore the need to account for both biological uncertainty and market structure when evaluating pest impacts and designing policy responses.