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A Model of Incentive Compatibility under Moral Hazard in Livestock Disease Outbreak Response

Author

Listed:
  • Gramig, Benjamin M.
  • Horan, Richard D.
  • Wolf, Christopher A.

Abstract

This paper uses a principal-agent model to examine incentive compatibility in the presence of information asymmetry between the government and individual producers. Prior models of livestock disease have not incorporated information asymmetry between livestock managers and social planners. By incorporating the asymmetry, we investigate the role of incentives in producer behavior that influences the duration and magnitude of a disease epidemic.

Suggested Citation

  • Gramig, Benjamin M. & Horan, Richard D. & Wolf, Christopher A., 2005. "A Model of Incentive Compatibility under Moral Hazard in Livestock Disease Outbreak Response," 2005 Annual meeting, July 24-27, Providence, RI 19200, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea05:19200
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    File URL: http://purl.umn.edu/19200
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    References listed on IDEAS

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    1. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
    2. Mahul, Olivier & Gohin, Alexandre, 1999. "Irreversible Decision Making in Contagious Animal Disease Control under Uncertainty: An Illustration Using FMD in Brittany," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(1), pages 39-58, March.
    3. Kuchler, Fred & Hamm, Shannon, 2000. "Animal disease incidence and indemnity eradication programs," Agricultural Economics, Blackwell, vol. 22(3), pages 299-308, April.
    4. Bicknell, Kathryn & Wilen, James E. & Howitt, Richard E., 1999. "Public policy and private incentives for livestock disease control," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 43(4), December.
    5. Charles E. Hyde & James A. Vercammen, 1997. "Costly Yield Verification, Moral Hazard, And Crop Insurance Contract Form," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 393-407.
    6. Richard D. Horan & Christopher A. Wolf, 2005. "The Economics of Managing Infectious Wildlife Disease," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 537-551.
    7. Harris, Milton & Raviv, Artur, 1979. "Optimal incentive contracts with imperfect information," Journal of Economic Theory, Elsevier, vol. 20(2), pages 231-259, April.
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    Citations

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    Cited by:

    1. Hirsch, Bernhard & Nell, Martin, 2007. "Anreizkompatibilität von Entschädigungssystemen für Kosten und Verluste aus Tierseuchenausbrüchen in der Europäischen Union," Working Papers on Risk and Insurance 21, University of Hamburg, Institute for Risk and Insurance.
    2. Jin, Yanhong H. & McCarl, Bruce A., 2006. "Animal Disease Related Pre-event Investment and Post-event Compensation: A Multi-agent Problem," 2006 Annual meeting, July 23-26, Long Beach, CA 21216, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Oparinde, Adewale & Birol, Ekin, 2011. "Farm households' preference for cash-based compensation versus livelihood-enhancing programs: A choice experiment to inform avian flu compensation policy in Nigeria," IFPRI discussion papers 1072, International Food Policy Research Institute (IFPRI).

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