The Externalities of Conventional and Organic Pest Management: When Do Gains to Cooperation Exist?

During the 1990s, demand for organic products increased on average by 20% each year. This growth in demand fueled growth in organic crop acreage. Between 1992 and 2005, organic cropland more than quadrupled, going from 403,400 acres to just over 1.7 million acres (USDA, 2008). Demand is predicted to increase annually by an additional 9 to 16% through 2010 (Dimitri and Oberholtzer, 2005). This further increase in demand will lead to an additional expansion of organic acreage, increasing the heterogeneity of agricultural regions and increasing the interaction that occurs between conventional and organic farms as they more frequently share the same regional landscape. Sharing the same landscape implies that they share pest and natural enemy populations. The movement of these organisms links farms within a region, potentially causing one grower’s pest control decisions to impact other growers. This paper examines these interactions. The analysis focuses on one organic and one conventional profit-maximizing grower. One pest and one natural enemy population connect the time periods in the model, and the movement of these populations connects the grower’s fields, creating a spatial-dynamic model. The analysis compares the privately optimal levels of pest control on the neighboring farms with the socially optimal levels of pest control. This comparison will illuminate situations when private decisions lower the region’s total profits via negative externalities created by the movement of insects. The model examines how these externalities differ under different population dynamics.