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Are Production Decisions Decoupled under a Bond Scheme? Experimental Evidence

Amy M. Nagler, Dale J. Menkhaus, Christopher T. Bastian, Nicole S. Ballenger, Erik O'Donoghue and C. Edwin Young

Review of Agricultural Economics, 2009, vol. 31, issue 2, 222-230

Abstract: Experimental economics procedures were used to investigate impacts of a proposed bond scheme on production decisions. As expected, production with subsidy payments tied to a support price was substantially higher than with no policy. A shift from the support price to equivalent annual or lump-sum payments not tied to price resulted in production at or near no-policy levels, providing empirical evidence to support the theoretical prediction that bond schemes would not result in production distortions. Potential extensions to the basic model used in this study also are presented. Copyright 2009 Agricultural and Applied Economics Association

Date: 2009
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