The conservation reserve program as a least-cost land retirement mechanism

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Abstract

Mechanism design theory is used to characterize the properties of a least-cost CRP. If marginal land rents decrease with acres farmed then a least-cost CRP is a set of nonlinear price schedules. If marginal land rents are independent of acres farmed then an offer system constitutes a least-cost CRP. The least-cost offer system gives a useful estimate of the upper bound of a least-cost CRP. Empirical results suggest that a 34-million-acre CRP should have cost no more than $1 billion per year.

Original languageEnglish (US)
Pages (from-to)93-105
Number of pages13
JournalAmerican Journal of Agricultural Economics
Volume77
Issue number1
DOIs
StatePublished - Feb 1995

Keywords

  • Asymmetric information
  • Contract
  • Mechanism design
  • Private information

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