Ex ante evaluation of policy measures: Testing effecfts of reward or punishment with different probabilities in a framed field experiment about fertilizer reduction in palm oil production

Stefan Moser and Oliver Mubhoff

No 212475, 2015 Conference, August 9-14, 2015, Milan, Italy from International Association of Agricultural Economists

Abstract: Palm oil production creates negative externalities, e.g., through intensive fertiliser application. Policies to limit externalities need an effective, sustainable and efficient measure We use a business simulation game in a framed field experiment in Indonesia to test ex ante different incentives for reducing such negative externalities. This setting allows inclusion of adequate contextual features, required for reasonable ex ante evaluation of policy measures. The different designs of the test incentives (either a reward or punishment) varied in their magnitude and probability of occurrence but with constant effects on expected income. Results show that participants react differently to these incentives, indicating that the design can contribute significantly to effectiveness, sustainability or efficiency. A high reward with a low probability was found to be the most effective and sustainable incentive. Moreover, for the most efficient design, a low and certain reward is indicated.

Keywords: Agricultural and Food Policy; Environmental Economics and Policy; Farm Management (search for similar items in EconPapers)
Pages: 35
Date: 2015
New Economics Papers: this item is included in nep-agr, nep-exp, nep-pke and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaae15:212475

DOI: 10.22004/ag.econ.212475

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