Short- vs. Long-Term Decision-Making for Disease Control: A Dynamic Structural Econometric Model of Verticillium Wilt Management

• Agricultural Economics Workshop

Date and Location

Thursday, December 3, 2015, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

When faced with a disease that requires long-term investments in order to control, short- and long-term decision-makers may have different incentives and choose to manage the disease differently. We develop and estimate a dynamic structural econometric model of Verticillium wilt management for lettuce crops in Monterey County, California to determine the impact on welfare of decision-making by short-term versus long-term growers and to examine the intertemporal externalities between short-term growers. Our results affirm that fumigating with methyl bromide and planting broccoli are effective control options, and that they require long-term investments for future gain. However, renters are not rewarded for fumigating with methyl bromide or planting broccoli, even though these control methods benefit future renters, thus leading to an intertemporal externality between short-term growers. The long-term decision-making of long term growers yields higher average welfare per grower-month and more use of the control options, likely due to differences in the incentives faced by owners versus renters, differences in the degree to which the intertemporal externality is internalized by owners versus renters, the severity of Verticillium wilt, the effectiveness of control options, rental contracts, and a longer planning horizon.