Do farmers prefer increasing, decreasing, or stable payments in Agri-environmental schemes?

Abstract

Nearly all Agri-Environmental Schemes (AES) offer stable annual payments over the duration of the contract. Yet AES are often intended to be a transition tool, designed to trigger changes in farming practices rather than to support them indefinitely. A decreasing sequence of payments thus appears particularly attractive as a reward structure for AES. The standard discounted utility model supports this notion by predicting that individuals should prefer a decreasing sequence of payments if the total sum of outcomes is constant. Nevertheless, the literature shows that numerous mechanisms, such as increasing productivity, anticipatory pleasure, and loss aversion, can, by contrast, incline individuals to favor an increasing sequence of payments. To understand the preferences of farmers for different payment sequences, we propose a review of the mechanisms highlighted by the literature in psychology and economics. We then test farmers' preferences for stable, increasing or decreasing payments through a choice experiment (CE) survey. In this survey, farmers are offered hypothetical contracts rewarding the planting of cover crops. To reduce hypothetical bias, the choice cards were designed following repeated interactions with local stakeholders. One hundred twenty-three French farmers, about 15% of those contacted, responded to the survey. Overall, farmers do not present a clear willingness to depart from the usual stable payments. Nevertheless, 17% declare a preference for increasing sequences of payment. Moreover, we find a significant rejection of decreasing payments by farmers with a lower discount rate or farmers more willing to take risks than the median farmer, contradicting the discounted utility model.

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Crop up! : adoption and value chain organisation in crop diversification transitions

“…It is well established in this literature that contract attributes influence farmers' acceptance decisions (e.g. Bougherara et al, 2021;Christensen et al, 2011;Santos et al, 2016). Beyond the contract itself, previous research has shown that participation in AES is also related to farmer and farm characteristics (e.g.…”

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