Supply response to countercyclical payments and base acre updating under uncertainty: An experimental study

Christopher R. Mcintosh, Jason F. Shogren, Erik Dohlman

Research output: Contribution to journalArticlepeer-review

18 Scopus citations

Abstract

We design an experiment to simulate how people make agricultural production decisions under three policy scenarios, each incorporating direct payments (DPs): (a) price uncertainty without countercyclical payments (CCPs); (b) price uncertainty with CCPs; and (c) price uncertainty, CCPs, and uncertainty regarding base acreage updating. Results are the CCP program and perceived possibility of future base updating created incentives for subjects to invest more in program (base) crops, despite payments being decoupled from current production decisions. Those choosing to reduce revenue risk by increasing plantings of base crops may face reduced incomes, suggesting the efficiency of crop markets may be diminished.

Original languageEnglish (US)
Pages (from-to)1046-1057
Number of pages12
JournalAmerican Journal of Agricultural Economics
Volume89
Issue number4
DOIs
StatePublished - Nov 1 2007

Keywords

  • Base acreage
  • Countercyclical payments
  • Experiments
  • Risk

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