Coordinating to Eradicate Animal Disease, and the Role of Insurance Markets

Thumbnail Image
Date
2007-11-01
Authors
Hennessy, David
Major Professor
Advisor
Committee Member
Journal Title
Journal ISSN
Volume Title
Publisher
Authors
Person
Hennessy, David
Professor
Research Projects
Organizational Units
Journal Issue
Is Version Of
Versions
Series
Department
Center for Agricultural and Rural Development
Abstract

Farmed animal production has traditionally been a dispersed sector. Biosecurity actions relevant to eradicating infectious diseases are generally non-contractible, and might involve inordinately high transactions costs if they were contractible. If an endemic disease is to be eradicated within a region, synchronized actions need to be taken to reduce incidence below a critical mass so that spread can be contained. Using a global game model of coordination under public and private information concerning the critical mass required, this paper characterizes the success probability in an eradication campaign. As is standard in global games, heterogeneity in private signals can support a unique equilibrium. Partly because of strategic interactions, concentrated production is found to facilitate eradication whenever unit participation costs are decreasing. Policies to manipulate the critical mass have both a direct effect and a strategic coordination effect. Policies to manipulate information can have subtle and non-intuitive consequences. A program to keep disease out can be modeled similarly. It is shown, too, that coordination problems may lead to multiple equilibria in animal disease insurance markets, so that these markets may complicate a disease eradication program by creating opportunities for multiple inefficient equilibria. The presence of private insurance markets may facilitate coordination and, for good or ill, can seal the fate of a program.

Comments
Description
Keywords
Citation
DOI
Source
Copyright
Collections