Volume 36, Issue 2, August 2011

August, 2011

Equity Basis Selection in Allocation Environments: An Empirical Analysis

By: Aadland, David; Koplin, Van
Successful formation and long-term stability of cooperative ventures is often linked to the perceived fairness of the cost and resource allocations that these ventures employ. Indeed, the lack of a consensus over what basis should be used for gauging equitable allocation can undermine the prospects for collaboration. We use irrigation cost sharing as a context for examining the equity basis selections of cooperative ventures that successfully form and endure. Our analysis reveals that these selections are explained by features of the cooperative environment and inequities in the derived benefits from the irrigation water.
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August, 2011

Improving the Use of Experimental Auctions in Africa: Theory and Evidence

By: Morawetz, Ulrich B.; De Groote, Hugo; Kimenju, Simon Chege
Experimental auctions have not been widely used in Africa. However, auctions are important tools for evaluating new products and technologies. To increase the quality of these experiments, we explore an alternative first-price bidding mechanism that is more similar to African market exchanges and we analyze factors likely to affect bidding. Experiments with African consumers show that the proposed first-price mechanism has no advantage over conventional second-price mechanisms. Results show high and significant cash-in-hand, experimenter, and time of day effects in main rounds, and significant ordering effects in test rounds. These effects need to be carefully considered when applying the Becker-DeGroot-Marschak mechanism in Africa.
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August, 2011

Revisiting Cheap Talk with New Evidence from a Field Experiment

By: Silva, Andres; Nayga, Rodolfo M., Jr.; Campbell, Benjamin L.; Park, John L.
We assess the reduction of hypothetical bias in consumers’ willingness to pay (WTP) for products by applying a generic, short, and neutral cheap talk script in a retail setting. Using an open-ended elicitation mechanism with non-hypothetical, hypothetical, and hypothetical with cheap talk treatments, our results indicate that the hypothetical WTP values are higher than the nonhypothetical values, but the hypothetical with cheap talk values are not significantly different from non-hypothetical estimates.
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August, 2011

The Effect of Communicating Ambiguous Risk Information on Choice

By: Melkonyan, Tigran A.
Decision makers are frequently confronted with ambiguous risk information about activities with potential hazards. This may be a result of conflicting risk estimates from multiple sources or ambiguous risk information from a single source. The paper considers processing ambiguous risk information and its effect on the behavior of a decision maker with a-maximin expected utility preferences. The effect of imprecise risk information on behavior is related to the content of information, the decision maker’s trust in different sources of information, and his or her aversion to ambiguity.
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August, 2011

Trade-Related Policy and Canadian-U.S. Fed Cattle Transactions Basis

By: Schulz, Lee L.; Schroeder, Ted C.; Ward, Clement E.
Price differences among fed cattle prices in Canada and the United States (referred to here as fed cattle basis) are important for Canadian cattle feeders, but changing government regulations in Canada and the United States have made basis more variable. This article uses transaction data from Canadian feedlots to quantify fed cattle price differentials in light of new policy initiatives. Using transaction prices, we find that differing slaughter regulations, labeling laws, and policies affecting access to U.S. markets for Canadian cattle affect fed cattle basis.
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August, 2011

Understanding U.S. Consumer Demand for Milk Production Attributes

By: Wolf, Christopher A.; Tonsor, Glynn T.; Olynk, Nicole J.
A choice experiment was used to examine the value of various fluid milk attributes. Respondents were surveyed regarding half or whole gallon milk purchases. A split-sample design was used to examine consumer inferences regarding food safety. Willingness to pay for verification of production process attributes varied across attributes and verifying entity. Consumers were generally willing to pay substantial premiums for milk produced without the use of rbST, on local family farms, with assured food safety enhancement, and for these claims to be verified by the U.S. Department of Agriculture.
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August, 2011

Improving the Nutrient Content of Food through Genetic Modification: Evidence from Experimental Auctions on Consumer Acceptance

By: Colson, Gregory; Huffman, Wallace E.; Rousu, Matthew C.
This paper assesses consumers’ acceptance of nutritionally enhanced vegetables using a series of auction experiments administered to a random sample of adult consumers. Evidence suggests that consumers are willing to pay significantly more for fresh produce with labels signaling enhanced levels of antioxidants and vitamin C achieved by moving genes from within the species, as opposed to across species. However, this premium is significantly affected by diverse information treatments injected into the experiments.
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August, 2011

Something in the Water? Testing for Groundwater Quality Information in the Housing Market

By: McLaughlin, Patrick A.
I test the level of information regarding possible groundwater contamination in the residential real estate market in Washington County, Minnesota. An approximately seven square-mile trichloroethylene plume has affected hundreds of households’ water supplies since at least 1988 in the region. I find that homeowners were initially well-informed by market forces, but were later somewhat misinformed by government actions regarding the potential of water contamination from the plume. A disclosure law passed in 2003 may have added new, low-cost, and imperfect information to the market that could explain the change in informational awareness.
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August, 2011

How Do Homebuyers Value Different Types of Green Space?

By: Bark, Rosalind H.; Osgood, Daniel E.; Colby, Bonnie G.; Halper, Eve B.
It is important to understand tradeoffs in preferences for natural and constructed green space in semi-arid urban areas because these lands compete for scarce water resources. We perform a hedonic study using high resolution, remotely-sensed vegetation indices and house sales records. We find that homebuyers in the study area prefer greener lots, greener neighborhoods, and greener nearby riparian corridors, and they pay premiums for proximity to green space amenities. The findings have fundamental implications for the efficient allocation of limited water supplies between different types of green space and for native vegetation conservation in semi-arid metropolitan areas.
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August, 2011

Privatization, Public R&D Policy, and Private R&D Investment in China’s Agriculture

By: Hu, Ruifa; Liang, Qin; Pray, Carl E.; Huang, Jikun; Jin, Yanhong H.
Private R&D is a major source of innovation and productivity growth in agriculture worldwide. This paper examines trends and determinants of agricultural R&D in China. Results show that while the public sector monopolized agricultural research until recently, private agricultural R&D has grown rapidly since 2000, driven largely by agribusiness privatization. Public-sector R&D investments in basic research also encouraged private R&D research, but public investments in technology development crowded out private R&D investment. China’s private R&D investment would grow more rapidly if the government shifted public resources from technology development to basic research.
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August, 2011

The Effect of Information Choice and Discussion on Consumers’ Willingness-to-Pay for Nanotechnologies in Food

By: Roosen, Jutta; Bieberstein, Andrea; Marette, Stephan; Blanchemanche, Sandrine; Vandermoere, Frederic
We evaluate the impact of different information sequences on participants’ hypothetical willingness to pay (WTP) for food produced using nanotechnology. In three treatment groups, information on the health, societal, or environmental impact linked to nanotechnology was revealed in different sequences: an imposed order, a chosen order, and a chosen order after a discussion among participants. Results show that information choice is important. While in the imposed order, the first information revealed has no effect on WTP, the information chosen first has a strong impact. Discussion has no further impact. Health information was a priority and significantly decreased WTP, while societal and environmental information did not significantly influence WTP.
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August, 2011

Strategic Incentives in Biosecurity Actions: Theoretical and Empirical Analyses

By: Kobayashi, Mimako; Melkonyan, Tigran A.
We model a game between two players taking biosecurity actions and characterize the Nash equilibria and their properties for the cases of strategic complements and substitutes. Implications of the theoretical model are investigated using data for biosecurity behavior among producers participating in a livestock exhibition. Biosecurity actions with own benefits and lasting impacts in home communities exhibit a positive relationship with behavior of the producers from geographically close areas. The number and probabilities of biosecurity actions taken by exhibitors are positively associated with the number of animals exhibited and they vary among commercial and hobby producers and across species/types of commercial production.
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