How much is too much? Individual biodiversity conservation

The individual farmer has little incentive to care about the public good properties of on-farm biodiversity in the form of different crop varieties. There is a common assumption that, because of this, farmers will tend to maintain too little biodiversity on their farms compared with the social optimum. However, in developing countries, this assumption does not fit with the empirical data: because of poorly functioning insurance markets, farmers tend to maintain a wide range of different crop varieties to hedge against weather shocks and other uncertainties. In this paper we develop a theoretical model to account for this apparent contradiction, and show that farmers may in fact even maintain too much biodiversity on their farms, compared with the social optimum.