Agricultural & Resource Economics Working Papers

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Now showing 1 - 11 of 11
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    Behavioral Sources of the Demand for Carbon Offsets: An Experimental Study
    (2017-03) Kuhn, Kai-Uwe; Uler, Neslihan
    Voluntary carbon offset schemes have sprung up in the last decade offering individuals opportunities to neutralize their own carbon footprint. These schemes strongly appeal to the personal responsibility of individuals in reducing the carbon emissions they cause. In this paper we report on a controlled laboratory experiment to better understand the behavioral motivations driving the purchase of carbon offsets, i.e., payments towards the reduction of damages to the environment. We show that the opportunity to offset damages does not affect the total damages created by the individuals when individuals trade in competitive markets. At the same time, we find a stable demand for carbon offsets when the price is sufficiently low. Therefore, introduction of carbon offsets increases efficiency by eliminating some of the damages ex-post. Behavior, however, is very heterogeneous. Individuals with a high (low) personal-responsibility index increase their offset purchases as their own damage (total damages) increases, but do not condition their offsetting behavior on the total damages (own damages) created.
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    Estimating Ex Ante Cost Functions for Stochastic Technologies
    (2017-07) Chambers, Robert G.; Serra, Teresa
    This paper revisits the problem of estimating ex ante cost functions previously studied by Pope and Just (1996) and Moschini (2001). An ex ante cost function that generalizes their ex ante cost functions is introduced, and an econometric procedure for estimating a flexible approximation to it is developed. That generalized cost function is economically relevant not only for the Just and Pope (1996) choice setting but for general producer risk preferences, general stochastic technologies, and general forms of price uncertainty. An econometric strategy for estimating the resulting cost structure that adapts Moschini s (2001) "full-information" approach is developed. And that is followed by an econometric application to US agriculture.
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    Experimental Identification of Asymmetric Information: Evidence on Crop Insurance in the Philippines
    (2017-07) Gunnsteinsson, Snaebjorn
    Asymmetric information imposes costs on a wide range of markets and may explain why some important markets, such as most agricultural insurance markets, have failed to develop. It is hard to empirically identify the different dimensions of asymmetric information but doing so is crucial for improving efficiency and solving market failures. I develop a new experimental methodology and apply it to study asymmetric information in crop insurance in the Philippines. Using a combination of preference elicitation, a two-level randomized allocation of insurance and detailed data collection, I test for and find evidence of adverse selection, moral hazard and their interaction – that is, selection on anticipated moral hazard behavior. I conclude that information asymmetry problems are substantial in this context and that they are unlikely to be reduced appreciably through contract redesign alone.
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    How Consumers Respond to Product Certification and the Value of Energy Information
    (2017-08) Houde, Sébastien
    I study how consumers respond to competing pieces of information that differ in their degree of complexity and informativeness. In particular, I study the choice of refrigerators in the U.S., where a mandatory disclosure labeling program provides detailed information about energy cost, and a certification labeling program provides a simple binary-star rating related to energy use. I find that the coarse certification may help some consumers to pay attention to energy information, but for others, it may crowd out efforts to process more accurate, but complex, energy information. The effect of the certification on overall energy use is thus ambiguous.
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    The Impact of Taxes and Wasteful Government Spending on Giving
    (2020-05) Sheremeta, Roman M.; Uler, Neslihan
    We examine how taxes impact charitable giving and how this relationship is affected by the degree of wasteful government spending. In our model, individuals make donations to charities knowing that the government collects a flat-rate tax on income (net of charitable donations) and redistributes part of the tax revenue. The rest of the tax revenue is wasted. The model predicts that a higher tax rate increases charitable donations. Surprisingly, the model shows that a higher degree of waste decreases donations (when the elasticity of marginal utility with respect to consumption is high enough). We test the model’s predictions using a laboratory experiment with actual donations to charities. We find that the tax rate has an insignificant effect on giving. The degree of waste, however, has a large, negative and highly significant effect on giving.
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    Incomplete Variational Preferences
    (2017-06) Chambers, Robert G.; Melkonyan, Tigran; Quiggin, John
    We examine incomplete preference structures in a framework that allows for various relaxations of the independence axiom. We derive preference representations in terms of willingness-to-pay measures, and demonstrate how these representation can be used to determine preference incompleteness and to elicit preferences empirically.
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    Independent vs. Collaborative Fundraising: Understanding the Role of Information
    (2019-02) Eckel, Catherine; Guney, Begum; Uler, Neslihan
    We use “real donation” laboratory experiments to compare independent fundraising, where donation requests from different charities arrive sequentially to potential donors, with collaborative fundraising, where donation requests from different charities arrive simultaneously. We find that collaborative fundraising generates significantly larger total donations compared to independent fundraising. We show that the order of requests affects the level of donations only in independent fundraising; in particular, participants donated larger amounts to charities whose requests arrived earlier. We then test whether these differences might be explained by the informational asymmetry between these two fundraising mechanisms by varying the information received by the subjects.
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    Moral Hazard and the Energy Efficiency Gap: Theory and Evidence
    (2016-12) Giraudet, Louis-Gaëtan; Houde, Sébastien; Maher, Joseph
    We investigate how moral hazard problems can cause sub-optimal investment in energy efficiency, a phenomenon known as the energy efficiency gap. We focus on contexts where both the quality offered by the energy efficiency provider and the behavior of the energy user are imperfectly observable. We first formalize under-provision of quality and compare two policy instruments: energy-savings insurance and minimum quality standards. Both instruments are second-best, for different reasons. Insurance induce over-use of energy, thereby requiring incomplete coverage in equilibrium. Standards incur enforcement costs. We then provide empirical evidence of moral hazard in the U.S. home retrofit market. We find that for those measures, the quality of which is deemed hard to observe, realized energy savings are subject to day-of-the-week effects. Specifically, energy savings are significantly lower when those measures were installed on a Friday—a day particularly prone to negative shocks on workers’ productivity—than on any other weekday. The Friday effect explains 65% of the discrepancy between predicted and realized energy savings, an increasingly documented manifestation of the energy efficiency gap. We finally parameterize a model of the U.S. market for attic insulation and find that the deadweight loss from moral hazard is important over a range of specifications. Minimum quality standards appear more desirable than energy-savings insurance if energy-use externalities remain unpriced.
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    When Income Depends on Performance and Luck: The Effects of Culture and Information on Giving
    (2017-01) Rey-Biel, Pedro; Sheremeta, Roman M.; Uler, Neslihan
    We study how giving depends on income and luck, and how culture and information about the determinants of others’ income affect this relationship. Our data come from an experiment conducted in two countries, the US and Spain, that have different beliefs about how income inequality arises. We find that when individuals are informed about the determinants of income, there are no cross-cultural differences in giving. However, when uninformed, Americans give less than the Spanish, and this difference persists even after controlling for beliefs, personal characteristics, and values.