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Are Production Decisions Decoupled under a Bond Scheme? Experimental Evidence

Author

Listed:
  • Amy M. Nagler
  • Dale J. Menkhaus
  • Christopher T. Bastian
  • Nicole S. Ballenger
  • Erik O’Donoghue
  • C. Edwin Young

Abstract

Experimental economics procedures were used to investigate impacts of a proposed bond scheme on production decisions. As expected, production with subsidy payments tied to a support price was substantially higher than with no policy. A shift from the support price to equivalent annual or lump-sum payments not tied to price resulted in production at or near no-policy levels, providing empirical evidence to support the theoretical prediction that bond schemes would not result in production distortions. Potential extensions to the basic model used in this study also are presented.

Suggested Citation

  • Amy M. Nagler & Dale J. Menkhaus & Christopher T. Bastian & Nicole S. Ballenger & Erik O’Donoghue & C. Edwin Young, 2009. "Are Production Decisions Decoupled under a Bond Scheme? Experimental Evidence," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 31(2), pages 222-230.
    • Handle: RePEc:oup:revage:v:31:y:2009:i:2:p:222-230.
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    File URL: http://hdl.handle.net/10.1111/j.1467-9353.2009.01434.x
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    References listed on IDEAS

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    1. Menkhaus, Dale J. & Bastian, Chris T. & Phillips, Owen R. & O'Neill, Patrick D., 2000. "Supply and Demand Risks in Laboratory Forward and Spot Markets: Implications for Agriculture," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 32(1), pages 159-173, April.
    2. Harry de Gorter & David R. Just & Jaclyn D. Kropp, 2008. "Cross-subsidization Due to Inframarginal Support in Agriculture: A General Theory and Empirical Evidence," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(1), pages 42-54.
    3. Ashenfelter, Orley, et al, 1992. "An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems," Econometrica, Econometric Society, vol. 60(6), pages 1407-1433, November.
    4. Davis, Douglas D. & Holt, Charles a., 1993. "Experimental economics: Methods, problems and promise," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 8(2), pages 179-212.
    5. Dale J. Menkhaus & Owen R. Phillips & Chris T. Bastian, 2003. "Impacts of Alternative Trading Institutions and Methods of Delivery on Laboratory Market Outcomes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1323-1329.
    6. Friedman,Daniel & Sunder,Shyam, 1994. "Experimental Methods," Cambridge Books, Cambridge University Press, number 9780521456821.
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    Cited by:

    1. Liesbeth Colen & Sergio Gomez Y Paloma & Uwe Latacz-Lohmann & Marianne Lefebvre & Sophie Thoyer & Raphaële Préget, 2015. "(How) can economic experiments inform EU agricultural policy?," JRC Research Reports JRC97340, Joint Research Centre.

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