Evaluation of cumulative externality: environmental economics, oligopoly and the private provision of public goods

This paper evaluates environmental externality when the structure of the externality is cumulative. The evaluation exercise is based on the assumption that the agents in question form conjectural variations. A number of environments are encompassed within this classification and have received due attention in the literature. Each of these heterogeneous environments, however, possesses considerable analytical homogeneity and permit subscription to a general model treatment. These environments include environmental externality, oligopoly and the analysis of the private provision of public goods. We highlight the general analytical approach by focusing on this latter context, in which debate centers around four issues: the existence of free-riding, the extent to which contributions are matched equally across individuals, the nature of conjectures consistent with equilibrium, and the allocative inefficiency of alternative regimes. This paper resolves each of these issues, with the following conclusions: A consistent-conjectures equilibrium exists in the private provision of public goods. It is the monopolistic-conjectures equilibrium. Agents act identically, contributing positive amounts of the public good in an efficient allocation of resources. There is complete matching of contributions among agents, no free-riding, and the allocation is independent of the number of members within the community. Thus the Olson conjecture—that inefficiency is exacerbated by community size—has no foundation in a consistent-conjectures, cumulative-externality, context (212 words).

Determinants of biosecurity behaviour of British cattle and sheep farmers: a behavioural economics analysis

The paper analyses the impact of a priori determinants of biosecurity behaviour of farmers in Great Britain. We use a dataset collected through a stratified telephone survey of 900 cattle and sheep farmers in Great Britain (400 in England and a further 250 in Wales and Scotland respectively) which took place between 25 March 2010 and 18 June 2010. The survey was stratified by farm type, farm size and region. To test the influence of a priori determinants on biosecurity behaviour we used a behavioural economics method, structural equation modelling (SEM) with observed and latent variables. SEM is a statistical technique for testing and estimating causal relationships amongst variables, some of which may be latent using a combination of statistical data and qualitative causal assumptions. Thirteen latent variables were identified and extracted, expressing the behaviour and the underlying determining factors. The variables were: experience, economic factors, organic certification of farm, membership in a cattle/sheep health scheme, perceived usefulness of biosecurity information sources, knowledge about biosecurity measures, perceived importance of specific biosecurity strategies, perceived effect (on farm business in the past five years) of welfare/health regulation, perceived effect of severe outbreaks of animal diseases, attitudes towards livestock biosecurity, attitudes towards animal welfare, influence on decision to apply biosecurity measures and biosecurity behaviour. The SEM model applied on the Great Britain sample has an adequate fit according to the measures of absolute, incremental and parsimonious fit. The results suggest that farmers’ perceived importance of specific biosecurity strategies, organic certification of farm, knowledge about biosecurity measures, attitudes towards animal welfare, perceived usefulness of biosecurity information sources, perceived effect on business during the past five years of severe outbreaks of animal diseases, membership in a cattle/sheep health scheme, attitudes towards livestock biosecurity, influence on decision to apply biosecurity measures, experience and economic factors are significantly influencing behaviour (overall explaining 64% of the variance in behaviour).