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Coordination and allocation on land markets under increasing scale economies and heterogeneous actors - An experimental study

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  • Balmann, Alfons
  • Kellermann, Konrad
  • Larsen, Karin
  • Sandri, Serena
  • Schade, Christian

Abstract

Economies of scale and scope are often not exploited in Western agriculture. A general reason is probably that various types of transaction costs limit coordination among farmers. A more specific explanation is that coordination on land markets or machinery cooperation is difficult to achieve when farmers are heterogeneous as some kind of price differentiation is necessary for a Pareto-superior solution. This paper investigates experimentally such a coordination game with heterogeneous agents using an example inspired by agricultural land markets. The experimental findings suggest that a Pareto-optimal solution may not be found when agents are heterogeneous. The findings provide evidence for market failures and cooperation deficits as reasons for unexploited economies of scale in agriculture. Our findings are consistent with coordination failures that appear to be driven by behavioural factors such as anchoring-and-adjustment, inequity aversion, and a reverse form of winner’s curse.

Suggested Citation

  • Balmann, Alfons & Kellermann, Konrad & Larsen, Karin & Sandri, Serena & Schade, Christian, 2010. "Coordination and allocation on land markets under increasing scale economies and heterogeneous actors - An experimental study," 114th Seminar, April 15-16, 2010, Berlin, Germany 61093, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaa114:61093
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    File URL: http://ageconsearch.umn.edu/record/61093/files/balmann1.pdf
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    References listed on IDEAS

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    1. Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1990. "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure," American Economic Review, American Economic Association, vol. 80(1), pages 234-248, March.
    2. Karin Larsén, 2010. "Effects of machinery-sharing arrangements on farm efficiency: evidence from Sweden," Agricultural Economics, International Association of Agricultural Economists, vol. 41(5), pages 497-506, September.
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    Cited by:

    1. Appel, Franziska & Musshoff, Oliver, 2011. "How appropriate are myopic optimization models to predict decision behaviour: A comparison between agent-based models and business management games," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 115994, European Association of Agricultural Economists.

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    Keywords

    Agricultural and Food Policy; Farm Management; Land Economics/Use;

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