Hidden costs of control: four repetitions and an extension

We report four repetitions of Falk and Kosfeld's (Am. Econ. Rev. 96(5):1611-1630, 2006) low and medium control treatments with 476 subjects. Each repetition employs a sample drawn from a standard subject pool of students and demographics vary across samples. We largely confirm the existence of hidden costs of control but, contrary to the original study, hidden costs of control are usually not substantial enough to significantly undermine the effectiveness of economic incentives. Our subjects were asked, at the end of the experimental session, to complete a questionnaire in which they had to state their work motivation in hypothetical scenarios. Our questionnaires are identical to the ones administered in Falk and Kosfeld's (Am. Econ. Rev. 96(5):1611-1630, 2006) questionnaire study. In contrast to the game play data, our questionnaire data are similar to those of the original questionnaire study. In an attempt to solve this puzzle, we report an extension with 228 subjects where performance-contingent earnings are absent i.e. both principals and agents are paid according to a flat participation fee. We observe that hidden costs significantly outweigh benefits of control under hypothetical incentives.

Can grass biomethane be an economically viable biofuel for the farmer and the consumer?

Farm incomes in Ireland are in decline and many farmers would operate at a loss in the absence of subsidies. Agriculture is responsible for 27% of Ireland's greenhouse gas emissions and is the largest contributing sector. Penetration of renewable energy in the heat and transport sectors is falling short of targets, and there is no clear plan for achieving them. The anaerobic digestion of grass to produce biogas or biomethane is put forward as a multifaceted solution, which could help meet energy and emissions targets, reduce dependence on imported energy, and provide additional farm income. This paper addresses the economic viability of such a system. Grass biogas/biomethane fares poorly under the current combined heat and power tariff structure, which is geared toward feedstock that attracts a gate fee. Tariff structures similar to those used in other countries are necessary for the industry to develop. Equally, regulation should be implemented to allow injection of biomethane into the gas grid in Ireland. Blends of natural gas and biomethane can be sold, offering a cost-competitive green fuel. Sale as a renewable transport fuel could allow profitability for the farmer and savings for the consumer, but suffers due to the lack of a market. Under current conditions, the most economically viable outlet for grass biomethane is sale as a renewable heating fuel. The key to competitiveness is the existing natural gas infrastructure that enables distribution of grass biomethane, and the renewable energy targets that allow renewable fuels to compete against each other. © 2010 Society of Chemical Industry and John Wiley & Sons, Ltd.