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Livestock Disease Indemnity Design under Common Uncertainty: A Multi-agent Problem

Author

Listed:
  • Tong Wang

    (Texas A&M AgriLife Research)

  • Seong Cheol Park

    (Texas A&M AgriLife Research)

Abstract

For most of the contagious livestock diseases, the disease prevalence rates among farms are interrelated. This article develops a principal multi-agent model to study the optimal livestock indemnity design in face of common uncertainties. Our results indicate that the indemnity scheme taking multiple farms into account is most applicable in two cases: 1) the farmers' disease prevalence rates are highly correlated and 2) the effectiveness of biosecurity effort proves to be low.

Suggested Citation

  • Tong Wang & Seong Cheol Park, 2014. "Livestock Disease Indemnity Design under Common Uncertainty: A Multi-agent Problem," Economics Bulletin, AccessEcon, vol. 34(3), pages 1396-1409.
    • Handle: RePEc:ebl:ecbull:eb-13-00685
    as

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    References listed on IDEAS

    as
    1. Rogerson, William P, 1985. "The First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 53(6), pages 1357-1367, November.
    2. Fleckinger, Pierre, 2012. "Correlation and relative performance evaluation," Journal of Economic Theory, Elsevier, vol. 147(1), pages 93-117.
    3. Dilip Mookherjee, 1984. "Optimal Incentive Schemes with Many Agents," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(3), pages 433-446.
    4. Benjamin M. Gramig & Richard D. Horan & Christopher A. Wolf, 2008. "Livestock Disease Indemnity Design When Moral Hazard Is Followed by Adverse Selection," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 627-641.
    5. David A. Hennessy, 2007. "Behavioral Incentives, Equilibrium Endemic Disease, and Health Management Policy for Farmed Animals," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 698-711.
    6. Kobayashi, Mimako & Melkonyan, Tigran A., 2011. "Strategic Incentives in Biosecurity Actions: Theoretical and Empirical Analyses," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(2), pages 1-21, July.
    7. Wolf, Christopher A., 2005. "Producer Livestock Disease Management Incentives and Decisions," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 8(1), pages 1-16.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    biosecurity; common uncertainty; indemnity design; livestock disease; principal multi-agent model; relative performance evaluation.;
    All these keywords.

    JEL classification:

    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling

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