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Simulating the Effects of a Green Payment Program on the Diffusion Rate of a Conservation Technology

Published online by Cambridge University Press:  15 September 2016

Kenneth A. Baerenklau
Kenneth A. Baerenklau*
Affiliation:
Department of Environmental Sciences, University of California–Riverside
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Abstract

The decision to adopt a potentially profitable but unfamiliar conservation technology is cast in a multi-period Bayesian framework. Specifically, dairy farmers who are both risk-averse and susceptible to peer group influence progressively learn about the true impact of adopting reduced phosphorus dairy diets on their income distributions as they repeatedly experiment with this new technology. Empirically calibrated simulations are used to examine the effects of a voluntary green payment program on the rate of technological diffusion. Results suggest that (a) green payments can accelerate learning and produce significant, permanent changes in behavior relatively quickly and for a reasonable cost; (b) shorter contracts offering larger incentives may be more cost-effective when learning plays an important role in behavioral change; and (c) unknown prior beliefs can reduce the efficacy of a green payment program, implying efforts to verify these priors or to ensure against them by increasing the payment level may be worthwhile.

Keywords

conservation technology adoptioncost sharingendogenous learninggreen paymentsneighborhood effectsrisk aversionvoluntary programs
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 33 , Issue 1 , April 2004 , pp. 121 - 137
Copyright
Copyright © 2004 Northeastern Agricultural and Resource Economics Association 

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