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Asymmetric Information, Externalities and Incentives in Animal Disease Prevention and Control

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  • David A. Hennessy
  • Christopher A. Wolf
Abstract
Incentives influence behaviour while an understanding of farmer behaviour facilitates the control and prevention of infectious livestock disease. This paper lays out several perspectives on how information problems and other externalities affect biosecurity incentives. We use the principal–agent framework to examine livestock disease management in the presence of potential moral hazard and adverse selection. Moral hazard may apply to biosecurity decisions while adverse selection may apply to disease reporting. The example of compensation policies illustrates the importance of creating appropriate incentives: compensation must be sufficient to ensure early reporting but not so large as to discourage appropriate levels of biosecurity effort. Other cases of externalities are more diffuse than those modelled using principal–agent analysis, placing emphasis on third†party effects and coordination problems. Three examples are provided. One concerns free†riding when facing an endemic disease pool that can be managed by limiting sources and flows. Another regards coordination failure when securing against an exotic disease where farmer efforts complement and communicating actions are important. The last arises from absence of a risk market where an adverse infrastructural support externality could be managed by disease outbreak insurance.

Suggested Citation

  • David A. Hennessy & Christopher A. Wolf, 2018. "Asymmetric Information, Externalities and Incentives in Animal Disease Prevention and Control," Journal of Agricultural Economics, Wiley Blackwell, vol. 69(1), pages 226-242, February.
    • Handle: RePEc:bla:jageco:v:69:y:2018:i:1:p:226-242
    DOI: 10.1111/1477-9552.12113
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    Citations

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    Cited by:

    1. Wanglin Ma & Hongyun Zheng, 2022. "Heterogeneous impacts of information technology adoption on pesticide and fertiliser expenditures: Evidence from wheat farmers in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(1), pages 72-92, January.
    2. Yu, Li & Yin, Xundong & Chen, Yulong, 2018. "The behavioural economics of health protection: an empirical evidence of moral hazard in U.S. hog farms," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 62(4), October.
    3. Ma, Meilin & Delgado, Michael S. & Wang, H. Holly, 2024. "Risk, arbitrage, and spatial price relationships: Insights from China's hog market under the African Swine Fever," Journal of Development Economics, Elsevier, vol. 166(C).
    4. Delmond, Anthony & Ahmed, Haseeb, 2018. "Can Free-Riding Be Beneficial? Optimal Antimicrobial Use Under Free-Riding And Resistance Externalities," Working Papers 2018-2, School of Economic Sciences, Washington State University.
    5. Bate, Andrew M. & Jones, Glyn & Kleczkowski, Adam & Touza, Julia, 2021. "Modelling the effectiveness of collaborative schemes for disease and pest outbreak prevention," Ecological Modelling, Elsevier, vol. 442(C).
    6. Hennessy, David A. & Rault, Arnaud, 2023. "On systematically insufficient biosecurity actions and policies to manage infectious animal disease," Ecological Economics, Elsevier, vol. 206(C).
    7. K. Aleks Schaefer & Daniel P. Scheitrum & Steven van Winden, 2022. "Returns on investment to the British bovine tuberculosis control programme," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(2), pages 472-489, June.
    8. Ma, Wanglin & Zheng, Hongyun, 2021. "Impacts of Smartphone Use on Agrochemical Use Among Wheat Farmers in China: A Heterogeneous Analysis," 2021 Conference, August 17-31, 2021, Virtual 314991, International Association of Agricultural Economists.
    9. Osseni, Abdel Fawaz & Gohin, Alexandre & Rault, Arnaud, 2022. "Optimal Biosecurity Policy with Heterogeneous Farmers," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 47(2), May.
    10. Jianhua Wang & Chenchen Yang & Wanglin Ma & Jianjun Tang, 2020. "Risk preference, trust, and willingness-to-accept subsidies for pro-environmental production: an investigation of hog farmers in China," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 22(3), pages 405-431, July.

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