Comparing a best management practice scorecard with an auction metric to select proposals in a water quality tender

The focus of this paper is to compare different evaluation frameworks for selecting landholder proposals to improve water quality. The case study is a water quality tender performed in the Burdekin region in Northern Australia in 2007/2008 where bids could be assessed using an inputs-based best management practice scorecard or an outputs-based auction metric. The scorecard approach and other variants of multi-criteria analysis are commonly applied in grant schemes, where landholder proposals are rated by a range of inputs-based criteria. Output-based approaches are typically applied in water quality and conservation tenders, where an environmental benefits index is constructed to summarise the environmental improvements generated by each proposal. These then allow projects to be selected on the basis of cost effectiveness. The case study evaluation reported in this paper demonstrates that the input focus of multi-criteria analysis type assessments are flawed, and that the efficiency of public funding can be more than doubled using auction metrics to assess proposals for landholders to improve water quality.     

How Closely Do Hypothetical Surveys and Laboratory Experiments Predict Field Behavior?

We compare the ability of three preference elicitation methods (hypothetical choices, nonhypothetical choices, and nonhypothetical rankings) and three discrete-choice econometric models (the multinomial logit [MNL], the independent availability logit [IAL], and the random parameter logit [RPL]) to predict actual retail shopping behavior in three different product categories (ground beef, wheat flour, and dishwashing liquid). Overall, we find a high level of external validity. Our specific results suggest that the nonhypothetical elicitation approaches, especially the nonhypothetical ranking method, outperformed the hypothetical choice experiment in predicting retail sales. We also find that the RPL can have superior predictive performance, but that the MNL predicts equally well in some circumstances.     

A typology of graziers to inform a more targeted approach for developing natural resource management policies and agricultural extension programs

The use of landholder typologies to assist in the development of natural resource management (NRM) policies and agricultural extension programs has increased considerably in the past decade. In this paper we explore the potential of developing a typology of graziers to more effectively tailor policies and programs with the aim of improving land management outcomes. This is of particular importance since growing public concern about the environmental performance of the beef industry has led to increasing pressures on graziers to change their land management practices to decrease off-property impacts. To gain a better understanding of graziers’ land management practices and the factors that inform their decisions on how they manage their land we first developed a conceptual model of the relationship between grazier and grazing land where both can, ideally, thrive through conscious and timely land management decisions made and implemented by the grazier. A successful grazier land relationship is likely to be consistent with value systems and social and economic factors, although the particulars of any individual approach may vary spatially and temporally. These factors, in particular graziers’ values and motivations to follow a particular management strategy, guided the development of our typology of graziers. Australia's Bowen-Broken basin, which has been identified as a major contributor of sediment and nutrients that enter the Great Barrier Reef lagoon, served as a case study for this research. Three broad types of graziers emerged: (1) traditionalists, (2) diversifiers, and (3) innovators. The authors argue that by understanding graziers’ values and motivations underlying each of the grazier types, government agencies and NRM organisations can more effectively tailor their policy and extension programs towards specific types of graziers and can work with specific groups to achieve reductions in sediment and nutrient runoff from grazing properties.     

In-Store Valuation of Steak Tenderness

Experimental methods were used to examine consumer willingness-to-pay for steak tenderness in a grocery store setting. When relying on a taste test alone to determine product quality, the participants paid an average premium of $1.23/lb for a tender versus tough steak. Fifty-one percent of the participants were willing to pay an average of $1.84/lb when they had completed a taste test and were also provided information about the steak's tenderness. Results indicate that most consumers prefer more tender steaks and that many are willing to pay a premium for tender steaks.     

Does timing matter? A real options experiment to farmers' investment and disinvestment behaviours

In this article, we analyse the (dis)investment behaviour of farmers in a within‐subject designed experiment. We ascertain whether, and to what extent, the real options approach (ROA) and the classical investment theory can predict farmers' (dis)investment behaviour. We consider a problem of optimal stopping, stylising an option to (dis)invest in agricultural technology. Our results show that both theories do not explain exactly the observed (dis)investment behaviour. However, some evidence was found that the ROA predicted the decision behaviour of farmers better than the classical investment theory. Moreover, we found that farmers learn from repeated investment decisions and consider the value of waiting over time. Socio‐demographic and farm‐specific variables also affect the (dis)investment behaviour of farmers.     

Risk Perceptions, Risk Preference, and Acceptance of Risky Food

Consumers' risk preferences are often overlooked in studies of consumer demand for risky food. We find that risk preferences elicited through context-less lottery choices are significantly related to consumers' stated preferences for genetically modified (GM) food. These results suggest risk preferences elicited in the laboratory are not artificial in the sense that they appear to be related to the same risk preferences that govern other individual decisions such as food choice. Consistent with theoretical expectations, risk perceptions and risk preferences were found to be significant determinants of acceptance of GM food, which has important implications for explaining consumer behavior.     

Optimal Institutional Mechanisms for Funding Generic Advertising: An Experimental Analysis

Given the uncertain legal status of generic advertising programs for agricultural commodities, alternative voluntary funding institutions are investigated that could provide a high level of benefits to producers. This experimental study simulates key economic and psychological factors that affect voluntary producer contributions to generic advertising. The results suggest that producer referenda play a critical role in increasing contributions and that producer surplus is maximized by a provision point mechanism instituted by producer referendum with thresholds ranging from 68% to 90%, and expected funding from 47% to 77% of the time, depending on the level of advertising effectiveness.     

Open access post-harvest grazing and farmers’ preferences for forage production incentives in Ethiopia

Open access post-harvest in situ grazing is widespread in areas where a mixed crop-livestock system is common. Where this is not discouraged, because livestock is important, conservation agriculture, which depends on keeping the soil surface covered with crop residues is unlikely to be implemented. One way to reduce open access grazing is through restricting communal grazing access to allow rights of exclusion, while simultaneously improving the production of livestock feeds. This paper analyzes farmers’ perceptions about post-harvest free grazing on agricultural lands and identifies incentives that motivate forage production, to help inform forage development and policy. We collected data from randomly selected farm households in the Nile Basin of Ethiopia and used a choice experiment method. We found that a majority of farmers would prefer post-harvest grazing restrictions to the existing reciprocal post-harvest grazing. Farmers also had strong preferences for forage production policy incentives, but the results reveal considerable preference heterogeneity. The study provides policy makers with needed information in formulating policy incentives for smallholder forage production systems.     

Is Risk Aversion Really Correlated with Wealth? How Estimated Probabilities Introduce Spurious Correlation

Economists frequently focus on correlations between wealth and risk preferences but rarely observe the probabilities needed to test this relationship empirically. These unobserved probabilities are typically estimated via profit or production functions conditioned on wealth correlates, which may leave statistical fingerprints on subsequently-estimated risk aversion coefficients and confound correlations between wealth and risk preferences. Using data from an experiment with observable probabilities, we compare risk aversion coefficients based on true probabilities with those based on probabilities estimated using standard approaches and show how estimated probabilities can change risk aversion coefficients substantially and introduce spurious correlation between risk aversion and wealth.     

Poverty, Risk Aversion, and Path Dependence in Low-Income Countries: Experimental Evidence from Ethiopia

In most low-income countries, rural households depend on mixed rain-fed agriculture/livestock production, which is very risky. Due to numerous market failures, there are few ways to shift risks to third parties. The literature has focused on what determines the responses of households in such environments. Of special concern are path dependencies in which households experiencing failure are prone to further failure and potential poverty traps. This paper estimates levels and determinants of risk aversion in the highlands of Ethiopia. We find high risk aversion and evidence that constraints have important impacts on risk-averting behavior with perhaps significant implications for long-term poverty. The results also suggest the possibility of path dependence and offer insights into links between risk aversion and poverty traps.     

The Problem of Free Riding in Voluntary Generic Advertising: Parallelism and Possible Solutions from the Lab

Producers of many commodities pay for generic advertising, which is a public good for producers and, in cases like healthy foods, enhances social welfare. Though most programs were initially funded through the Voluntary Contribution Mechanism, many became mandatory to mitigate free riding. This experimental research simulates key economic and psychological details of these programs and produces donation results strikingly similar to a historic example. Because mandatory programs may be declared unconstitutional, the Provision Point Mechanism is tested as an alternative. This research also shows that refund-by-request donation mechanisms establish a status quo of contributing and reduce free riding.     

European Consumers' Willingness to Pay for U.S. Beef in Experimental Auction Markets

Consumers' willingness to pay for Irish, Norwegian, U.S. hormone-free, and U.S. hormone-treated beef was studied in an experimental auction market. We ran four simultaneous second-price auctions to elicit efficiently the complete distribution of willingness to pay differences among our four alternatives. Most participants preferred domestic to imported beef, and half the participants preferred Irish to U.S. hormone-free beef. Hormone-treated beef received the lowest mean bid, but 28% of the participants were indifferent or preferred U.S. hormone-treated to U.S. hormone-free beef.     

Does Production Labeling Stigmatize Conventional Milk?

Production labeling is a common approach for differentiating otherwise similar products in the marketplace. While these labels may convey positive messages to consumers about the new product, they may simultaneously stigmatize the conventionally produced product by highlighting perceived problems. The net economic result for producers can be negative since consumers may decrease their willingness to pay for the conventional product that dominates the market, while the new product has a relatively small market share. This experimental research identifies this stigma effect in the case of milk, where the introduction of rBST-free and organic milk reduces consumers' willingness to purchase conventional milk.     

Finding Missing Markets (and a Disturbing Epilogue): Evidence from an Export Crop Adoption and Marketing Intervention in Kenya

Farmers may grow crops for local consumption despite more profitable export options. DrumNet, a Kenyan NGO that helps small farmers adopt and market export crops, conducted a randomized trial to evaluate its impact. DrumNet services increased production of export crops and lowered marketing costs, leading to a 32% income gain for new adopters. The services collapsed one year later when the exporter stopped buying from DrumNet because farmers could not meet new EU production requirements. Farmers sold to other middlemen and defaulted on their loans from DrumNet. Such experiences may explain why farmers are less likely to adopt export crops.