We assess empirically how agricultural lands should be used to produce the highest valued outputs, which include food, energy, and environmental goods and services. We explore efficiency tradeoffs associated with allocating land between food and bioenergy and use a set of market prices and nonmarket environmental values to value the outputs produced by those crops. We also examine the degree to which using marginal land for energy crops is an approximately optimal rule. Our empirical results for an agricultural watershed in Iowa show that planting energy crops on marginal land is not likely to yield the highest valued output.

A growing body of literature demonstrates that many behavioral anomalies observed in stated-preference elicitation methods such as the contingent valuation method are also observed in actual choices and vice versa. This presentation furthers the argument that such parallel behaviors should be viewed as a strength of stated-preference methods. Three well-known anomalies observed in both stated preferences and actual choices are first reviewed to lay the foundation for this argument. A number of lesser-known anomalies are then presented to demonstrate the wider prevalence of parallel anomalies in stated preferences and actual choices.

Two benefit-transfer approaches are used to estimate welfare losses from closure of Lake Erie beaches. We identify conditions for which the function transfer, which is more time-consuming and data-intensive, is worth the effort relative to a simple value transfer. The function transfer was essential for estimating beach demand (trips) and demand elasticity (change in trips); when evaluating individual beach closures with known trip demand, the two methods yielded similar results. Results produced by the two transfer methods deviated (up to 106 percent) when multiple beaches were closed simultaneously because value transfer did not account for the loss of beach substitutes.

Few studies have examined the impacts of ground water quality on residential property values. Using a unique data set of well tests, we link residential real estate transactions to home-specific contamination and conduct a hedonic analysis of sales in Lake County, Florida, where pollution concerns relate primarily to agricultural run-off. We find that recent testing and contamination of ground water there correspond to a 2–6 percent depreciation in home values, an effect that diminishes over time. Focusing on nitrogen-based contamination, we find that prices decline mainly when concentrations exceed the regulatory health standard, suggesting as much as a 15 percent depreciation at levels twice the standard.

This study uses a field experiment involving 251 adult participants to determine which messages related to climate change, extreme weather events, and decaying infrastructure are most effective in encouraging people to pay more for investments that could alleviate future water-quality risks. The experiment also assesses whether people prefer the investments to be directed toward gray or green infrastructure projects. Messages about global warming induced climate change and decaying infrastructure lead to larger contributions than messages about extreme weather events. The results suggest that people are likely to pay more for green infrastructure projects than for gray infrastructure projects.

We conduct a laboratory experiment to test for the existence of the endowment effect—a gap between willingness to accept and willingness to pay—for improved drinking water quality using a within-subject design. We find a statistically significant and positive gap. Willingness to accept is 62 to 125 cents higher than willingness to pay on average, indicating the presence of endowment effects. This gap is robust to information about the quality of water being consumed. We also identify some heterogeneity in the size of the gaps that is associated with differences in subjects' knowledge of drinking water quality and disparities in their incomes.

Water-quality markets that allow point-nonpoint trades assume that nonpoint best management practices (BMPs) achieve the targeted reductions as soon as they are implemented. However, changes in water quality in response to BMPs occur over time—from a few months to decades. We simulate emission allocations using static and dynamic-optimization models to determine whether a simple static allocation can produce results comparable economically and environmentally to complex multi-period designs for nitrogen emissions to Chesapeake Bay. We find that static rules provide relatively large cost savings compared to dynamic rules but result in a delay in achievement of water-quality targets.

Empirical studies suggest that cost-share programs are unlikely to reduce exploitation of ground water and nonpoint-source pollution. By introducing an induced irrigation technology in our model, we find theoretically that the optimal amount of irrigation water and nitrogen fertilizer increases (decreases) when the increased rate of the marginal net economic benefits from their use with an induced irrigation technology exceeds (is less than) an increase in the rate of irrigation efficiency. Our results suggest that producers should use relatively more irrigation water and fertilizer when greater quantities of high-value crops are grown because producers will adopt improved irrigation technologies for such crops.