SABIIA - Sistema Aberto e Integrado de Informação em Agricultura (Sabiia)

Chen, Shu-Ling; Miranda, Mario J..

Texas dryland upland cotton yields have historically exhibited greater variation and more distributional irregularities than the yields of other crops, raising concerns that conventional parametric distribution models may generate biased or otherwise inaccurate crop insurance premium rate estimates. Here, we formulate and estimate regime-switching models for Texas dryland cotton yields in which the distribution of yield is conditioned on local drought conditions. Our results indicate that drought-conditioned regime-switching models provide a better fit to Texas county-level dryland cotton yields than conventional parametric distribution models. They do not, however, generate significantly different Group Risk Plan crop insurance premium rate estimates.

Tipo: Journal Article

Palavras-chave: Actuarial rating; Adverse selection; Cotton; Crop insurance; Group risk plan; Regime-switching; Yield distribution; Agribusiness; Crop Production/Industries; Farm Management; Q10; Q14; Q18.

Ano: 2008

URL: http://purl.umn.edu/45522

Policy Choices about Agricultural Externalities and Sustainability: Diverse Approaches, Options and Issues

Tisdell, Clement A..

This paper reviews agricultural externalities as a source of market failure and as a reason for a lack of sustainability of agricultural incomes and production. It concentrates mainly on environmental externalities (which include biodiversity loss) but consideration is also given to externalities involving adverse selection. Types of agricultural externalities are classified and their nature is explored. Depending on their type and nature, different policy implications often follow. For example, no intervention may be required, or it may be reasonable for a farmer to have to pay to create an unfavourable externality or be paid to moderate or eliminate it. Adverse selection is also an externality phenomenon and some of its implications for agricultural...

EVALUATION OF CROP INSURANCE PREMIUM RATES FOR GEORGIA AND SOUTH CAROLINA PEACHES

Palavras-chave: Market failure; Environmental externalities; Adverse selection; Agriculture; Agricultural and Food Policy; Environmental Economics and Policy.

Ano: 2007

URL: http://purl.umn.edu/55105

Miller, Stephen E.; Kahl, Kandice H.; Rathwell, P. James.

We estimate actuarially fair premium rates for yield insurance for Georgia and South Carolina peaches for comparison to the premium rates established by the Risk Management Agency (RMA) for the 1999 crop. The RMA premium rates varied from county to county, but were identical for all growers in a given county. The estimated premium rates decrease with the grower's expected yield. The RMA rate structure encouraged adverse selection, as premium rates were too low for growers with low expected yields (especially at low coverage levels) and were too high for growers with high expected yields (especially at high coverage levels).

Tipo: Journal Article

Palavras-chave: Adverse selection; Crop insurance; Peaches; Premium rate; Yield guarantee; Risk and Uncertainty.

Ano: 2000

URL: http://purl.umn.edu/14711

Quality Signaling and International Trade in Food Products

Bureau, Jean-Christophe; Gozlan, Estelle; Marette, Stephan.

Focusing on the issue of food safety, we consider a framework of repeated purchases under the scenario of imperfect information on product quality (adverse selection and experience goods). A firm in a northern country can more easily detect tainted products than can a southern one. When imports are banned, the northern firm does not always signal the actual quality of its products. Competition from imports may lead the northern firm to test the quality of its products as a way to differentiate itself from foreign competitors. Consumers benefit from the disclosure of information on quality, even though borders are open to products of uncertain quality. However, competition from imports also increases the cost of signaling high quality. This can be...

Contract Design for Biodiversity Procurement

Palavras-chave: Adverse selection; North-south trade; Signaling; Trade; International Relations/Trade.

Ano: 2001

URL: http://purl.umn.edu/18636

Bardsley, Peter; Burfurd, Ingrid.

Market based instruments are proving increasingly effective in biodiversity procurement and in regulatory schemes to preserve biodiversity. The design of these policy instruments brings together issues in auction design, contract theory, biology, and monitoring technology. Using a mixed adverse selection, moral hazard model, we show that optimal contract design may differ significantly between procurement and regulatory policy environments.

Quality Ambiguity and the Market Mechanism for Credence Goods

Palavras-chave: Biodiversity; Procurement; Adverse selection; Moral hazard; Contract theory.

Ano: 2009

URL: http://purl.umn.edu/48047

Benner, Dietrich.

With credence goods consumers cannot judge actual quality neither before purchase (ex ante) nor after purchase (ex post). Trust has to replace own examination and verification. Applying Choquet-Expected Utility theory, ageneral model of credence goods is developed wich takes the problem of trust explicitly in its view and generalizes the problem of quality uncertainty on the 'market for lemmons' of Akerlof (1970) to 'quality ambiguity' with credence goods. The model shows the market mechanism only performing well in providing credence goods when consumers' trust in given information is not too low. With trust too low, sellers of credence good will be driven out of the market by trust induced adverse selection. In market equilibrium prices will always be...

Optimizing Voluntary Deforestation Policy in the Face of Adverse Selection and Costly Transfers

Palavras-chave: Credence goods; Asymmetric information; Quality ambiguity; Quality uncertainty; Adverse selection; Ambiguity; Choquet expected utility; Agricultural and Food Policy; Marketing; C72; D81; D82.

Ano: 2004

URL: http://purl.umn.edu/98639

van Benthem, Arthur A.; Kerr, Suzi.

As part of international climate change policy, voluntary opt-in programs to reduce emissions in unregulated sectors or countries have spurred considerable discussion. Since any regulator will make errors in predicting baselines, adverse selection will reduce efficiency since participants will self-select into the program. In contrast, pure subsidies lead to full participation but require large financial transfers; this is a particular challenge across countries. A global social planner facing costless transfers would choose such a subsidy to maximize efficiency. However, any actual policy needs to be individually rational for both the buying (industrialized) and selling (developing) country. We present a simple model to analyze this trade-off between...

Using a Farmer's Beta for Improved Estimation of Expected Yields

Palavras-chave: Voluntary opt-in; Adverse selection; Deforestation; Offsets; Emissions trading; REDD; Agricultural and Food Policy; Community/Rural/Urban Development; Environmental Economics and Policy; Land Economics/Use; Q54; Q56.

Ano: 2010

URL: http://purl.umn.edu/96813

Carriquiry, Miguel A.; Babcock, Bruce A.; Hart, Chad E..

Effects of sampling error in estimation of farmers’ mean yields for crop insurance purposes and their implications for actuarial soundness are explored using farm-level corn yield data in Iowa. Results indicate that sampling error, combined with nonlinearities in the indemnity function, leads to empirically estimated insurance rates that exceed actuarially fair values. The difference depends on the coverage level, the number of observations used, and the participation strategy followed by farmers. A new estimator for mean yields based on the decomposition of farm yields into systemic and idiosyncratic components is proposed, which could lead to improved rate-making and reduce adverse selection.

Tipo: Journal Article

Palavras-chave: Actual production history (APH); Adverse selection; Crop insurance; Mean yields estimation; Sampling error; Crop Production/Industries; Farm Management.

Ano: 2008

URL: http://purl.umn.edu/36707

Contracting with Agents Seeking Status

Bontems, Philippe.

We explore in this paper the consequences of status seeking preferences among agents contracting with a private principal in the context of production. We examine in particular the case of envy and we show that in general envy entails augmented distortions due to asymmetric information in optimal contracts. Furthermore if the principal neglects the preferences of the agents with respect to status, then potentially there is under-participation to the contract. We also show that if the principal is free to choose who can participate to the contract, then under some conditions the principal may prefer to contract with only a subset of potentially "profitable" agents (that is where his utility is strictly positive). We then ask whether contracting with agents...

Bigger is Better: Avoided Deforestation Offsets in the Face of Adverse Selection

Palavras-chave: Status; Adverse selection; Contracts; Envy; Externalities; Production Economics; D6; H0; D86.

Ano: 2009

URL: http://purl.umn.edu/49507

van Benthem, Arthur A.; Kerr, Suzi.

Voluntary opt-in programs to reduce emissions in unregulated sectors or countries have spurred considerable discussion. Since any regulator will make errors in predicting baselines and participants will self-select into the program, adverse selection will reduce efficiency and possibly environmental integrity. In contrast, pure subsidies lead to full participation but require large financial transfers. We present a simple model to analyze this trade-off between adverse selection and infra-marginal transfers. We find that increasing the scale of voluntary programs both improves efficiency and reduces transfers. We show that discounting (paying less than full value for offsets) is inefficient and cannot be used to reduce the fraction of offsets that are...

Asymmetric Information in the Market for Yield and Revenue Insurance Products

Palavras-chave: Environmental Economics and Policy; Deforestation; Offsets; Adverse selection; REDD; Climate change policy; Opt-in..

Ano: 2011

URL: http://purl.umn.edu/100569

Makki, Shiva S.; Somwaru, Agapi.

This report analyzes farmers' choice of crop insurance contracts and tests for the presence of asymmetric information in the market for multiple yield and revenue insurance products. Farmers' risk characteristics, their level of income, and the cost of insurance significantly affect their choices of yield and revenue insurance products as well as their selections of alternative coverage levels. Empirical analysis indicates that, in the presence of asymmetric information, high-risk farmers are more likely to select revenue insurance contracts and higher coverage levels. The results also indicate that premium rates do not accurately reflect the likelihood of losses, implying asymmetrical information in the crop insurance market.

Tipo: Report

Palavras-chave: Asymmetric information; Adverse selection; Crop insurance; Revenue insurance; Risk management; Risk and Uncertainty.

Ano: 2001

URL: http://purl.umn.edu/33587

The Effects of Transitional Yields on Adverse Selection in Crop Insurance

Walters, Cory G.; Shumway, C. Richard; Chouinard, Hayley H.; Wandschneider, Philip R..

Transitional yields based on county average can be used by producers as the basis to obtain crop insurance on fields that have not previously produced the crop. Using field-level crop insurance contract data for several crops in five different growing regions we examine the impact of this asymmetric information on adverse selection. Our results indicate that adverse selection does exist from the use of transitional yields and that it is crop specific but not land-quality specific.

Adverse Selection in the Environmental Stewardship Scheme: Does the Higher Level Entry Scheme Design Reduce Adverse Selection?

Palavras-chave: Adverse selection; Crop insurance; Transitional yields; Risk and Uncertainty; Q18.

Ano: 2007

URL: http://purl.umn.edu/9849

Quillerou, Emmanuelle; Fraser, Rob W..

The Environmental Stewardship Scheme provides payments to farmers for the provision of environmental services based on agricultural foregone income. This creates a potential incentive compatibility problem which, combined with an information asymmetry on farm land heterogeneity, could lead to adverse selection of farmers into the scheme. However, the Higher Level Scheme (HLS) design includes some features that potentially reduce adverse selection. This paper studies the adverse selection problem of the HLS using a principal agent framework at the regional level. It is found that, at the regional level, the enrolment of more land from lower payment regions for a given budget constraint has led to a greater overall contracted area (and thus potential...

Observing Unobservables: Identifying Information Asymmetries with a Consumer Credit Field Experiment

Palavras-chave: Adverse selection; Agri-environment; Environmental Stewardship; Principal-agent; Contract; Environmental Economics and Policy; D78; D82; H44; Q18; Q58.

Ano: 2009

URL: http://purl.umn.edu/51068

Karlan, Dean S.; Zinman, Jonathan.

Information asymmetries are important in theory but difficult to identify in practice. We estimate the empirical importance of adverse selection and moral hazard in a consumer credit market using a new field experiment methodology. We randomized 58,000 direct mail offers issued by a major South African lender along three dimensions: 1) the initial "offer interest rate" appearing on direct mail solicitations; 2) a "contract interest rate" equal to or less than the offer interest rate and revealed to the over 4,000 borrowers who agreed to the initial offer rate; and 3) a dynamic repayment incentive that extends preferential pricing on future loans to borrowers who remain in good standing. These three randomizations, combined with complete knowledge of the...

Optimale Vertragsdifferenzierung in der Agrarumweltpolitik

Palavras-chave: Information asymmetries; Field experiment; Adverse selection; Moral hazard; Development finance; Credit markets; Microfinance; Financial Economics; C9; D8; G2; G3; O1.

Ano: 2005

URL: http://purl.umn.edu/28482

Lack of Credibility in Food Markets - Driving Medium Quality Food Out of the Market

Glebe, Thilo W..

This article deals with the optimal differentiation of agri-environmental contracts based on a self-selection mechanism. The paper demonstrates that both economic efficiency and effectiveness of public expenditures can be increased, if a menu of combinations of farming practices and payments are offered. However, there is a trade-off between efficiency and effectiveness, since the optimal programme minimising government expenses does not simultaneously minimise farmers’ opportunity costs. A numerical example of differentiated agri-environmental contracts, aiming for the reduction of nitrogen fertiliser in wheat production, illustrates that efficiency and effectiveness gains can be substantial. Furthermore, it is shown that economic rents for agricultural...

Tipo: Journal Article

Palavras-chave: Agri-environmental policy; Efficiency; Adverse selection; Mechanism design; Self-selection; Agricultural and Food Policy; Environmental Economics and Policy.

Ano: 2006

URL: http://purl.umn.edu/97185

Christensen, Jan; Graversen, Jesper T..

Some food markets are dominated by high quality and standard quality segments, whereas medium quality products are almost absent. A modeling framework with asymmetric information regarding true quality of the products and the resulting lack of consumer confidence is presented. Uncertainty regarding the quality of alleged medium quality products provides certain consumer groups to divert consumptions away from medium quality to either standard or high quality products. These countervailing incentives explain the missing medium quality products. Empirical examples are given to motivate the model.

Adverse Selection in the Environmental Stewardship Scheme: Evidence in the Higher Level Stewardship Scheme?

Palavras-chave: Adverse selection; Asymmetric information; Consumer behavior; Product differentiation; Uncertainty; Consumer/Household Economics; D11; D82; Q13.

Ano: 2005

URL: http://purl.umn.edu/24539

Quillerou, Emmanuelle; Fraser, Rob W.; Fraser, Iain.

The Environmental Stewardship Scheme provides payments to farmers for the provision of environmental services based on foregone agricultural income. This creates a potential incentive compatibility problem which, combined with an information asymmetry on farm land heterogeneity, could lead to adverse selection of farmers into the Scheme and therefore reduced cost-effectiveness of the Scheme. This reduced cost-effectiveness would be represented by a systematic overpayment of farmers for the land enrolled into the Scheme, compared to the opportunity cost of production. This paper examines the potential adverse selection problem affecting the higher tier of the Environmental Stewardship, the Higher Level Stewardship, using a principal agent framework combined...