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We design an experiment to simulate how people make agricultural production decisions under three policy scenarios, each incorporating direct payments (DPs): (a) price uncertainty without countercyclical payments (CCPs); (b) price uncertainty with CCPs; and (c) price uncertainty, CCPs, and uncertainty regarding base acreage updating. Results are the CCP program and perceived possibility of future base updating created incentives for subjects to invest more in program (base) crops, despite payments being decoupled from current production decisions. Those choosing to reduce revenue risk by increasing plantings of base crops may face reduced incomes, suggesting the efficiency of crop markets may be diminished. Copyright 2007, Oxford University Press.

Using the "event study" method, we measure the impact on agricultural biotechnology firm equity values of new regulations and other limitations placed on the marketing of biotech crops. Unanticipated declines to biotech firm stock prices indicate that newly imposed regulatory restrictions appear most likely to diminish profit expectations for these firms. The stock price reaction to decisions by crop handlers, processors, or retailers to segregate or limit the use of biotech crops and to reports questioning their safety are less pronounced. Incentives to engage in new biotech crop research and development may be diminished by these developments.

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