Publication Date

4-2012

Series Number

12-WP 527

Abstract

This paper models producers’ interdependent incentives to participate in a voluntary livestock disease control program. Under strategic complementarity among participation decisions, after a slow start momentum can build such that market premium for participation and participation rate increase sequentially. Non-participation, partial participation and full participation can all be Nash equilibria while participation cost heterogeneity will dispose the outcome toward incomplete participation. We find plausible conditions under which temporary government subsidies to the least cost-effective producers causes tipping toward full participation. Applying parameters from the literature on Johnes’ disease, we illustrate factors that may affect participation. These include cost heterogeneity and program effectiveness.

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