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This paper analyzes the effects of a reduction of stochastic, yet persistent, plant diseases on prices, quantities, profits, and consumer surplus. We differentiate between short-run, unanticipated changes and long-run, anticipated changes since firms can adapt to anticipated changes. A theoretical model illustrates the short-term impacts of a stochastic shock in the severity of the disease and the associated movement along the demand curve. The model also analyzes an expected, persistent change in disease incidence and the associated long-run impacts of firms’ response to a reduction in disease incidence. Using pear data, we estimate the short- and long-run effects of a reduction in fire blight. Given the estimated demand elasticity for pears, we find that, in the short run, consumers would benefit more than producers from a mitigation of fire blight ($5.23 million vs. $745,000 annually from a 1% increase in yield). Once producers adapt to the absence of fire blight, the imbalance would be even more skewed towards consumers ($5.57 million vs. $467,000).
