Investment behavior and status quo bias of conventional and organic hog farmers: An experimental approach

Abstract

AbstractDespite the economic benefits of organic farming, the conversion rates to this production method are low. The reasons for this reluctance are largely unknown; however, understanding this behavior is important for policy recommendations. Therefore, we experimentally investigate and compare the investment behavior of organic and conventional hog farmers. We examine whether the investment behavior depends on the organic or conventional farmers’ status quo of their production method. Our results show that farmers are more reluctant to invest in production methods they are not currently using compared with those already in use on their farm. Conventional, more risk-averse farmers, and those farmers holding a university degree, invest later in a hog barn. The results provide evidence that investment decisions depend on the status quo production method of a farmer and, thus, reveal that current subsidy structures may be ineffective in encouraging farmers to invest in production methods they are not currently using on their farms.