REECAP 7th Annual Meeting

Behaviourally Informed Policies: Testing Commitment Cost through Choice Experiments

Not scheduled

20m

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig

Using behavioral insights or economic psychology to improve food, agricultural, and agri-environmental policies Session Block

Speaker

Chiara Boeri (Wageningen University & Research)

Description

For farmers, transitioning to sustainable agricultural practices involves significant risks. These risks arise from institutional factors, such as subsidies not fully covering costs; market uncertainties, including the risk of low profit margins; production challenges, such as land availability and the threat of unwanted species reducing yields; and the risk of having to invest in new machineries and additional labour. Practices like strip cropping require long-term commitments to specific management strategies, further amplifying these risks. Advancing agricultural economics research in this area requires testing cost commitment theory through preference elicitation techniques, offering insights into farmers' decision-making processes.
We conducted a discrete choice experiment with a between-subject design to estimate and compare Dutch arable farmers' preferences for contract designs related to strip cropping. By including an information treatment, one group received the latest research findings on strip cropping feasibility, while another received only basic information. This approach will allow measuring how more complete information reduces uncertainty and affects farmer decision making. The inclusion of a no choice option captured the reluctance of individuals to change, allowing to assess how individual risk attitudes, business strategies, and previous adoption experience moderated contract preferences.
The characteristics of the choice cards reflected key aspects of cost commitment theory. First, the choice is framed as a four-years commitment, emphasizing a certain degree of irreversibility of investment. To capture uncertainty about the value of the good, we included attributes as the opportunity to experiment and price mark-ups, assuming different contractual scenarios. Additionally, yield variability compared to monoculture may affect the perceived attractiveness of strip cropping and thus the willingness to accept such an innovation. Furthermore, the ability to delay commitment affects farmer’s decision making process, thus we measured the temporal flexibility by incorporating the attribute "start date", to assess how longer decision windows allow reducing uncertainty thanks to the acquisition of more information about the agricultural practice in question.
This study will identify the economic and policy conditions under which farmers are most likely to adopt strip cropping practices. By analyzing preferences, it will provide insights into the relative importance of time preferences in farmer decision-making and help disentangle complex decision-making patterns in relation to risk-sharing mechanisms and transaction costs, supporting a shift towards more sustainable agriculture. Additionally, it will evaluate the impact of information-based interventions and policy instruments in promoting sustainable practices, providing valuable guidance for the design of effective support measures within the Common Agricultural Policy.