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

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  • Baerenklau, Kenneth A.

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.

Suggested Citation

  • Baerenklau, Kenneth A., 2004. "Simulating the Effects of a Green Payment Program on the Diffusion Rate of a Conservation Technology," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 33(1), pages 1-17, April.
    • Handle: RePEc:ags:arerjl:31375
    DOI: 10.22004/ag.econ.31375
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    Cited by:

    1. Kenneth A. Baerenklau, 2005. "Toward an Understanding of Technology Adoption: Risk, Learning, and Neighborhood Effects," Land Economics, University of Wisconsin Press, vol. 81(1).
    2. Whitten, Stuart M. & Reeson, Andrew & Windle, Jill & Rolfe, John, 2008. "Barriers to and Opportunities for Increasing Participation in Conservation Auctions," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 5973, Australian Agricultural and Resource Economics Society.
    3. Whitten, Stuart M. & Reeson, Andrew & Windle, Jill & Rolfe, John, 2013. "Designing conservation tenders to support landholder participation: A framework and case study assessment," Ecosystem Services, Elsevier, vol. 6(C), pages 82-92.

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