Government Interventions in Promoting Sustainable Practices in Agriculture

Xiao

Naval Research Logistics

et al. 2022

Increased public concerns about animal welfare have spurred new regulations to improve animals' treatment and living conditions. We study how these regulations affect firms' product offerings, prices, and profits. We consider two competing animal agriculture supply chains, each consisting of a supplier and a buyer. New regulations require firms to choose between offering humane or organic products, which are differentiated by animals' living conditions. We find that consumers' growing awareness of animal welfare encourages firms to offer organic products, which require the highest standards for animals' living conditions. We also show that tightening humane product standards and loosening organic product standards encourage firms to offer organic products-but with distinct pricing implications. The former leads to higher retail prices whereas the latter may lower retail prices. Depending on costs and consumers' awareness of animal welfare, a humane product may be priced higher or lower than an organic product. Furthermore, we provide conditions under which a regulator should offer a unit-cost or an investment cost subsidy to improve social welfare. We show that subsidies can encourage firms to change from offering humane to organic products, or vice versa, to enhance total social welfare. KEYWORDSanimal agriculture, animal welfare regulation, product design, supply chain 1 the United States' laying hen flock was cage-free, up from 9.8% in 2016 (CIWF, 2019a;CIWF, 2019b).These measures also generated three categories of products in the animal agriculture industry-conventional, humane, and organic-differentiated by the animals' living conditions. Conventional products come from animals raised in factory farms, which is the dominant form of animal agriculture in the United States (Foer, 2009). Factory farms closely confine a large number of animals for maximum land usage and productivity (e.g., chicken battery cages, pig gestation crates, veal crates). The economic benefit, however, comes at the expense of a poor living environment for the animal, more water and air pollution, and greater food safety risk for consumers (Smith, 2017). Humane products come from animals living in an improved environment. For example, nine U.S. states have banned gestation crates for sows, a move Canada also made in 2015 (Patton, 2015). That same year,

Section: Literature Reviewmentioning

confidence: 99%

The impact of animal welfare regulations on firms' product offerings: Humane or organic product?

Xiao

Naval Research Logistics

et al. 2022

“…An et al (2015) study the impacts of aggregating farmers through formal or informal cooperatives, and, in particular, reducing production cost by technology diffusion. Recent working papers extend this line of research by examining governmental interventions on farmers' planting decisions (Alizamir et al, 2018) and sustainable production (Akkaya et al, 2017) in agriculture sectors. Finally, the readers are referred to Lee and Lee (2007) for classic supply chain literature in developing economies.…”

Section: Literature Reviewmentioning

confidence: 99%

Mitigating poverty through solar panels adoption in developing economies

Feng

2021

Decision Sciences

Motivated by a widely practiced strategy to combine the growth of the solar energy sector with poverty mitigation, we propose stylized models of households selling extra solar energy back to the grid, which generates a steady stream of income to overcome adoption barriers for solar panels, that is, high adoption cost and generation variability. By considering households' strategic consumption shifting behavior in response to varying intertemporal market electricity prices, we have presented the equilibrium adoption number and households' equilibrium profit. We have also demonstrated the government's optimal subsidy to reach a socially optimal adoption level. Furthermore, we investigate the popular Public Private Partnership (PPP) model in developing countries to promote the investment of solar panels. Under the PPP program, the private firms share both upfront cost and electricity revenue with households, while the government may provide subsidy to further encourage adoption. Despite the popularity of the PPP scheme, our model documents an unexpected negative implication by inducing a lower overall adoption level than the traditional scheme: As the PPP scheme relieves budgetary burden of households in adopting solar panels (infrastructure cost), anticipating the long-term revenue loss, they are less likely to participate in the first place. However, combined with the government intervention via adoption subsidy, the PPP scheme can lead to a win-win solution for all.

Production and Operations Management

“…Guda et al (2016) study a guaranteed support price scheme adopted in developing countries, under which the government promises to purchase the crop at a guaranteed price (which is attractive and independent of the market price). Akkaya et al (2016a) investigate the impacts of three types of government interventions-tax, subsidy and hybrid policies-on sustainable practice implementation, producer revenue, consumer surplus and return on government spending. Akkaya et al (2016b) study the effectiveness of price support, cost support and yield enhancement efforts adopted in developing economies.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Akkaya et al. (2016a) investigate the impacts of three types of government interventions—tax, subsidy and hybrid policies—on sustainable practice implementation, producer revenue, consumer surplus and return on government spending. Akkaya et al.…”

Section: Literature Reviewmentioning

confidence: 99%

Agricultural Partnership for Dairy Farming

Hsu

Lai

Liang³

2019

This paper studies an innovative agricultural partnership model in the dairy industry. In developing regions, farmers are constrained by limited resources, while it is costly for an enterprise to set up new facilities and raise dairy animals all on its own. Under the partnership model, dairy animals are raised by individual farmers during the maturing stage and then by the enterprise during the milking stage. This can lower the enterprise’s investment cost, ensure milk quality, and also expand the farmers’ capacity given that a new batch can be raised when the old batch goes to the enterprise’s facilities. We find that from the enterprise’s perspective, the performance of this model depends on the farmers’ original capacity and capacity expansion ratio (i.e., how much it can expand under partnership). The profitability of the enterprise can either increase in the farmers’ original capacity if the expansion ratio is small or decreases otherwise. Compared with the conventional decentralized model and the independent integrated model, the partnership model is particularly preferred when the enterprise’s market size is intermediate. Several extensions of our model show that the government quality subsidy offered to the farmers may sometimes lower dairy product quality as well as the enterprise’s profit; when the enterprise aims to maximize the total profit of the partnership, it will contract with more farmers and produce more dairy products; and if the farmers have more bargaining power, the partnership model will benefit the farmers more but be less preferable to the enterprise.