Livestock Disease Indemnity Design When Moral Hazard is Followed by Adverse Selection

Averting or limiting the outbreak of infectious disease in domestic livestock herds is an economic and potential human health issue that involves both the government and individual livestock producers. Producers have private information about preventive biosecurity measures they adopt on their farms prior to outbreak (ex ante moral hazard), and following outbreak they possess private information about whether or not their herd is infected (ex post adverse selection). We investigate how indemnity payments can be designed to provide incentives to producers to invest in biosecurity and report infection to the government, while simultaneously addressing the information asymmetry between producers and the government. We show how addressing the adverse selection problem leads to a risk-sharing tradeoff in the moral hazard problem. We compare the relative magnitude of the first- and second-best levels of biosecurity investment and indemnity payments to further demonstrate the tradeoff between risk-sharing and efficiency, and we discuss the implications for status quo U.S. policy.Food Consumption/Nutrition/Food Safety, Livestock Production/Industries, Risk and Uncertainty,

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

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.livestock disease, moral hazard, principal-agent model, Institutional and Behavioral Economics,

The Innovation Process: Practices in Food and Agribusiness Companies

Agribusiness,

Nitrogen Application Decision-Making Under Climate Risk in The U.S. Corn Belt

Nitrogen fertilizer is one of the most important inputs to corn production and farmers manage their crop by deciding how much to apply, when to apply it and how to apply it to maximize their yields and resulting profit. There is risk inherent in crop fertility manage- ment because once nitrogen is applied to the soil it is no longer immobile and cropland is subject to loss of this costly input under different weather conditions. Days suitable for field work, a farm’s machinery set, and weather conditions determine when field prepara- tion and planting activities are completed each year. This paper documents the methods and data used to evaluate the economic costs and benefits of the agronomic practice of ‘‘splitting” nitrogen fertilizer—applying some at or just before planting and a second appli- cation after the plant has already emerged and is in greatest need of nutrients. An example of how to use the free online decision support tool Corn Split NDST (splitn.agclimate4u.org) to evaluate the climate risk and economics of post-planting N applications is developed to illustrate the application of methods described

Greenhouse gas emissions offsets from agriculture: opportunities and challenges

As the scientific evidence of global climate change continues to accumulate and the predicted impacts of a warming planet become more widely known, national policies and international agreements designed to mitigate global warming have sought to strike a balance between environmental sustainability and economic achievement. The Kyoto Accord was developed to established binding emissions reduction targets and timetables for industrialized countries, and included flexibility provisions intended to reduce the overall cost of emissions reductions