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<p>There are 6 research projects each with specific objectives and outputs. </p>
<p>Project 1 will develop a general version of an integrated, multi-market framework of heterogeneous consumers, heterogeneous producers, and imperfectly competitive firms, and will use this new methodological framework to analyze the market and welfare effects of standard policy mechanisms like subsidies and taxes. All the other Projects utilize this framework. </p>
<p>Project 2 will design economic choice experiments to study consumer attitudes toward nanofoods and nanotech applications that could enhance food safety and estimate consumer willingness to pay for these products/ processes under different information structures. It will examine how the labeling regime, the source of information, the framing of the information provided and the nature of the nanotech attribute affect consumer attitudes and willingness to pay for nanofoods. It will use parameter estimates from the empirical studies to calibrate an analytical model and, through simulations, determine the magnitude of the market and welfare effects of food nanotechnology applications. </p>
<p>Project 3 will assess the Coase Theorem as a solution to the Downstream Water Pollution Problem (DWPP). The Coase Theorem provides the prediction that once property rights are assigned, or otherwise designated, individuals will voluntarily participate in markets, or market-like processes, resulting in optimal and efficient outcomes to negative externality and common pool resource problems at a low cost. The predictions of the Coase Theorem are unlikely to hold due to the complex and heterogeneous motivational structure of real farmers. Once the complexity and heterogeneity of farmer choice is included, this study will provide a critical, experimentally based assessment of Coase Theorem violations. It will Develop and test alternative theories and models regarding solutions to the DWPP. Based on this it will develop substantive policy recommendations for more efficient downstream water quality control involving non-pecuniary and less intrusive approaches to externality and common pool resource problems offer the advantage of being both highly effective and less costly. </p>
<p>Project 4 will identify policy components for energy crops that would result in sustainable, full-scale biomass delivery systems in the Great Plains, at least cost to taxpayers. </p>
<p>Project 5 will examine how major farm programs impact economic development by influencing the entrepreneurial activities of farmers and ranchers for the case of value-added agriculture. It will develop a framework with heterogeneous agricultural producers and consumers and use that framework to examine how agricultural policies influence the value-added businesses. </p>
<p>Project 6 will assess how producers jointly utilize government programs and production practices to manage climate risk. The analysis will incorporate farm size and geographical heterogeneity in measuring producers' decisions. </p>
<p>For all: development of methodological framework and design of experiments/surveys/simulations will be in 2012. Experiments/surveys/simulations will be run in 2013. Analysis and reporting will be in Q1 2014.</p>
<p>NON-TECHNICAL SUMMARY:<br/> The Center for Agricultural & Food Industrial Organization Policy Research Group (CAFIO-PRG) will develop: a novel, empirically relevant, integrated, multi-market framework of heterogeneous producers, heterogeneous consumers, and imperfectly competitive firms; and properly designed choice and laboratory experiments to analyze important policy issues in six research projects covering the four public policy emphasis areas identified for the USDA's Policy Research Centers Grant Program. These approaches will examine the market potential and optimal regulatory response to food nanotechnology (Emphasis Area 4), producer behavior and design of policies related to downstream water pollution issues (Emphasis Area 2), least-cost policies to facilitate commercialization of biomass crops for energy (Emphasis Areas 1 and 2), the impact of agricultural
policies on entrepreneurship and the economic development of rural communities (Emphasis Area 3), and producer response to various risk management policies and tools (Emphasis Areas 1 and 2). CAFIO-PRG will leverage expertise from a consortium of 5 other Centers at UNL involving 11 Faculty. Educational impact will largely be through the training of 5 graduate students/postdoctorals as part of the research. Research findings will be published in peer reviewed journals. Relevant analysis and information will be disseminated to policymakers and non-governmental organizations as well as businesses, producers, and consumers through numerous outlets including substantial extension and outreach education efforts. An external advisory board will provide both guidance and evaluation of outcomes.
<p>APPROACH:<br/> CAFIO-PRG research will focus on the development and application of an empirically relevant, integrated, multi-market framework of analysis that explicitly accounts for heterogeneous consumers (i.e., consumers differing in preferences or/and incomes); heterogeneous producers (producers differing in education, experience, motivations, location, management skills, technology adopted); imperfectly competitive input suppliers, processors or/and retailers; and links and interactions between the agri-food supply channels of interest (i.e., markets of the regulated product and its relevant substitutes and complement products and services). This framework is neither a general equilibrium nor a partial equilibrium in the sense that it does not focus either on the whole economy or a single market. Instead, it is a flexible, multi-market framework that can be adapted
to analyze any number of supply channels of interest - i.e., any number of regulated products along with their substitutes and/or complement products. The general framework of analysis will be based on the various models of heterogeneous agents and imperfectly competitive firms developed by members of CAFIO-PRG. In addition to the development and application of this empirically relevant framework of analysis, a key component of this research is the extensive utilization of behavioral and experimental economic methods in policy analysis and policy design. In particular, CAFIO-PRG research will utilize, where appropriate, carefully designed choice and laboratory experiments to analyze the economic effects of policies (e.g., the impacts of a food policy on consumer willingness-to-pay and product demand; policy impacts on producer employment, technology, production, and/or conservation
decisions; firms' response to stricter quality standards (including water quality standards, etc.) and the effectiveness, efficiency, and desirability of different policy designs (e.g., different food labeling schemes, nutritional and/or food safety messages, drought response mechanisms and water quality policies designed on Coasean principles, etc.).
<p>PROGRESS: 2012/04 TO 2013/04<br/>OUTPUTS: The main focus of this project is on the development of a novel, empirically relevant, integrated, multi-market framework of policy analysis. This new policy analysis framework explicitly accounts for heterogeneous consumer preferences, heterogeneous producers, imperfectly competitive firms, and links and interactions between the agri-food supply channels of interest. This framework has now been developed and parts of it have been used to analyze important policy issues like: (a) the market potential and optimal regulatory response to food nanotechnology, (b) producer behavior and design of policies related to downstream water pollution issues, (c) least-cost policies to facilitate commercialization of biomass crops for energy, (d) the impact of agricultural policies on entrepreneurship and rural development, and (e) producer
response to various risk management policies. In particular, for policy issue (a) the new framework has been used to identify the determinants of market acceptance and success of food nanotechnology and specify the exact conditions under which the technology will end up being ineffective, non-drastic, and drastic. In addition, the research determined and compared the market and welfare effects of food nanotechnology under different labeling regimes. For policy issue (b) an experiment was designed and programmed during April-June 2012. A model of the property rights owner behavior was developed using the heterogeneity framework and degree of empathy as a differentiating parameter. The propositions of the model were tested using experimental data and preliminary results were reported in Czap et al. (2012, 2013). For policy issue (c) research has focused on heterogeneity of agronomic
characteristics and producer responses, and the implications of that heterogeneity for cost of supplying a processing plant. A case simulation study for delivery to Norfolk, NE, showed that heterogeneity of producer response increased the supply radius from 32 to 97 miles, cost from $80 to $91 per Mg, and incentives for FOB pricing by $1.5 million per year. For policy issue (d) we developed a model of agricultural producers differing in their managerial ability to study how agricultural programs such as crop insurance or CRP influence incentives for producers to engage in non-farm entrepreneurship. The model indicates that these programs reduce the share of agricultural producers that engage in non-farm entrepreneurship. Preliminary tests of this hypothesis have been conducted using the ARMS data. Finally, for policy issue (e), we have (i) completed a county-level analysis of the impact
of government programs on risk-reducing conservation practices; (ii) collected county-level characteristics from the USDA Census of Agriculture to examine heterogeneity in measureable farm characteristics such as size of farm, debt exposure, sales, and profit margins; and (iii) started to work with the Nebraska NASS office to coordinate implementation of an individual level survey that will allow us to examine the impact of heterogeneity in risk preferences and farm size on the use of risk-reducing conservation practices and government programs. PARTICIPANTS: Dr. Konstantinos Giannakas, Professor, Dept of Agricultural Economics, University of Nebraska-Lincoln (PI/PD). Dr. Peter Calow, Office of Research and Economic Development, UNL. Dr. John Anderson, Dr. Eric Thompson, and Miah Tran, Dept of Economics, UNL. Dr. Mark Burbach and Dr. Michael Hayes, School of Natural Resources, UNL. Dr.
Natalia Czap and Dr. Hans Czap, University of Michigan-Dearborn. Dr. Murray Fulton, University of Saskatchewan. Dr. Lilyan Fulginiti, Dr. Brad Lubben, Dr. Gary Lynne, Dr. Richard Perrin, Dr. Karina Schoengold, and Dr. Amalia Yiannaka, Dept of Agricultural Economics, UNL. TARGET AUDIENCES: Agricultural producers, food processors, retailers, consumers, policy makers, policy analysts and academics with an interest in the agri-food system. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.