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Are Production Decisions Decoupled under a Bond Scheme? Experimental Evidence
Author(s) -
Nagler Amy M.,
Menkhaus Dale J.,
Bastian Christopher T.,
Ballenger Nicole S.,
O'Donoghue Erik,
Young C. Edwin
Publication year - 2009
Publication title -
applied economic perspectives and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.4
H-Index - 49
eISSN - 2040-5804
pISSN - 2040-5790
DOI - 10.1111/j.1467-9353.2009.01434.x
Subject(s) - production (economics) , scheme (mathematics) , economics , bond , business , natural resource economics , microeconomics , finance , mathematics , mathematical analysis
Experimental economics procedures were used to investigate impacts of a proposed bond scheme on production decisions. As expected, production with subsidy payments tied to a support price was substantially higher than with no policy. A shift from the support price to equivalent annual or lump‐sum payments not tied to price resulted in production at or near no‐policy levels, providing empirical evidence to support the theoretical prediction that bond schemes would not result in production distortions. Potential extensions to the basic model used in this study also are presented.