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Modeling Interdependent Participation Incentives: Dynamics of a Voluntary Livestock Disease Control Program

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This paper models producers’ interdependent incentives to participate in a voluntary livestock disease control program. Under strategic complementarity among participation decisions, after a slow start momentum can build such that market premium for participation and participation rate increase sequentially. Non-participation, partial participation and full participation can all be Nash equilibria while participation cost heterogeneity will dispose the outcome toward incomplete participation. We find plausible conditions under which temporary government subsidies to the least cost-effective producers causes tipping toward full participation. Applying parameters from the literature on Johnes’ disease, we illustrate factors that may affect participation. These include cost heterogeneity and program effectiveness.

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Paper provided by Center for Agricultural and Rural Development (CARD) at Iowa State University in its series Center for Agricultural and Rural Development (CARD) Publications with number 12-wp527.

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Date of creation: Apr 2012
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Handle: RePEc:ias:cpaper:12-wp527

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Keywords: Incentives; livestock disease; momentum theorem; strategic complementarity; tipping; voluntary program.;

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  1. Olmstead, Alan L. & Rhode, Paul W., 2007. "Not on My Farm! Resistance to Bovine Tuberculosis Eradication in the United States," The Journal of Economic History, Cambridge University Press, vol. 67(03), pages 768-809, September.
  2. W. Kip Viscusi, 1978. "A Note on "Lemons" Markets with Quality Certification," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 277-279, Spring.
  3. Gramig, Benjamin M. & Horan, Richard D. & Wolf, Christopher A., 2008. "Livestock Disease Indemnity Design When Moral Hazard is Followed by Adverse Selection," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6542, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Wu, JunJie & Babcock, Bruce A., 1999. "The Relative Efficiency of Voluntary vs Mandatory Environmental Regulations," Journal of Environmental Economics and Management, Elsevier, vol. 38(2), pages 158-175, September.
  5. Glenn Sheriff & Daniel Osgood, 2010. "Disease Forecasts and Livestock Health Disclosure: A Shepherd's Dilemma," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 776-788.
  6. Na Li Dawson & Kathleen Segerson, 2003. "Voluntary Agreements with Industries: Participation Incentives with Industry-wide Targets," Working papers 2004-06, University of Connecticut, Department of Economics.
  7. Segerson, Kathleen & Miceli, Thomas J., 1998. "Voluntary Environmental Agreements: Good or Bad News for Environmental Protection?," Journal of Environmental Economics and Management, Elsevier, vol. 36(2), pages 109-130, September.
  8. Olmstead, Alan L. & Rhode, Paul W., 2004. "An Impossible Undertaking: The Eradication of Bovine Tuberculosis in the United States," The Journal of Economic History, Cambridge University Press, vol. 64(03), pages 734-772, September.
  9. Fares, M'hand & Rouviere, Elodie, 2010. "The implementation mechanisms of voluntary food safety systems," Food Policy, Elsevier, vol. 35(5), pages 412-418, October.
  10. Stranlund John K., 1995. "Public Mechanisms to Support Compliance to an Environmental Norm," Journal of Environmental Economics and Management, Elsevier, vol. 28(2), pages 205-222, March.
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