Abstract
PurposeFarmers often decide simultaneously on crop production or input use without knowing other farmers' decisions. Anticipating the behavior of other farmers can increase financial performance. This paper investigates the role of other famers' behaviors and other contextual factors in farmers' simultaneous production decisions.Design/methodology/approachMarket entry games are a common method for investigating simultaneous production decisions. However, so far they have been conducted with abstract tasks and by untrained subjects. The authors extend market entry games by using three real contexts: pesticide use, animal welfare and wheat production, in an incentivized framed field experiment with 323 German farmers.FindingsThe authors find that farmers take different decisions under identical incentive structures for the three contexts. While context plays a major role in their decisions, their expectations about the behavior of other farmers have little influence on their decision.Originality/valueThe paper offers new insights into the decision-making behavior of farmers. A better understanding of how farmers anticipate the behavior of other farmers in their production decisions can improve both the performance of individual farms and the allocational efficiency of agricultural and food markets.
Highlights
On-farm production decisions often take the form of what is known as “simultaneous decision-making” in game theory (Nerlove and Bessler, 2001; Savikhin and Sheremeta, 2013)
The purpose of this study is to explore the relationship between farmers’ decision-making behavior, their expectations about other famers, as well as the specific context in which a decision is made
We describe the design and implementation of contextualized market entry games (MEG) to study farmers’ production decisions
Summary
On-farm production decisions often take the form of what is known as “simultaneous decision-making” in game theory (Nerlove and Bessler, 2001; Savikhin and Sheremeta, 2013). Farmers decide simultaneously what crops to plant and what inputs to use without knowing (most) other farmers’ decisions. These simultaneous decisions determine the future supply. JEL Classification — C72, C93, D22, Q13 © Julia H€ohler and J€org Mu€ller. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
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