The internal rates of return on cotton and peanut research were not very sensitive to the
assumptions about price elasticities of supply or demand. For both commodities, an increase in
the price elasticity of demand resulted in very small decreases in the return on research
investment in that commodity. For both commodities, decreases in the price elasticity of demand
resulted in increases in the internal rate of return on investment. For cotton, an increase in the
price elasticity of supply caused a slight decrease in the return on research investment. A
decrease in the price elasticity of supply of cotton increased the IRR nearly 1%. An increase in
the price elasticity of supply for peanuts increased the return in peanut investment by only .07%.
A decrease in this elasticity decreased the IRR on peanut research by only .05%. Changes in the
price elasticity of supply for peanuts had a minor effect on the return to peanut research
investment.
The internal rate of return above is an average rate of return that does not indicate how
changes in research costs and benefits affected this rate over time. To investigate these changes
in the internal rate of return over time, the period (1963-1995) was separated into three
consecutive 10-year subperiods for each commodity. They will be for the years 1963-1973,
1974-1984, and 1985-1995. An internal rate of return was then calculated for each subperiod to
compare how research investments were performing over time. An initial stream of investments
was established using the seven previous years for each 10- year period. These results are
presented in Table 6.
The estimates for the IRR for the subperiods are not to be taken as accurate since the period
measured is too short to be meaningful. However, it should be noted that they are useful in
showing the trend in the returns to research on these two commodities. The internal rate of
return on cotton investment increased over the three subperiods. Investment in cotton research
20