In 2000, a genetically modified corn variety called StarLink that was not approved for human consumption was discovered in the food-corn supply. To estimate the price impact of this event on the U.S. corn market, we develop the relative price of a substitute method. This method applies not only to the StarLink event but also to rare events in other markets. We find that the contamination led to a 6.8% discount in corn prices and that the suppression of prices lasted for at least a year.

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Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology
2007
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