Modeling Interdependent Participation Incentives: Dynamics of a Voluntary Livestock Disease Control Program

Tong Wang, David A. Hennessy
April 2012  [12-WP 527]

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.

Keywords: Incentives, livestock disease, momentum theorem, strategic complementarity, tipping, voluntary program.

JEL classification: Q18, D83, L15

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