Simultaneous production decisions in agricultural contexts: an experimental investigation of pesticide use, animal welfare and wheat production

Abstract

Purpose: Farmers often decide simultaneously on crop production or input use without knowing other farmers' decisions. Anticipating the behavior of other farmers can increase financial performance. This paper investigates the role of other famers' behaviors and other contextual factors in farmers' simultaneous production decisions. Design/methodology/approach: Market entry games are a common method for investigating simultaneous production decisions. However, so far they have been conducted with abstract tasks and by untrained subjects. The authors extend market entry games by using three real contexts: pesticide use, animal welfare and wheat production, in an incentivized framed field experiment with 323 German farmers. Findings: The authors find that farmers take different decisions under identical incentive structures for the three contexts. While context plays a major role in their decisions, their expectations about the behavior of other farmers have little influence on their decision. Originality/value: The paper offers new insights into the decision-making behavior of farmers. A better understanding of how farmers anticipate the behavior of other farmers in their production decisions can improve both the performance of individual farms and the allocational efficiency of agricultural and food markets.