Experimental economics has the potential to fill some of the gaps in the economist's tool kit. This article describes experimental economics, its advantages and disadvantages, and why this tool might be a good choice in some situations. The article summarizes the history of its use by agricultural and resource economists. An illustrative example compares laboratory experiment data with survey data.

Short-run and long-run technical and allocative efficiencies were computed for 395 New York dairy farms using data envelopment or nonparametric procedures on 1990 Dairy Farm Business Summary data. The farms were, on average, more allocatively efficient in the short run than in the long run, but were more technically efficient in the long run than in the short run. Stanchion barns were as efficient as milking parlors, and milking more than two times per day did not increase efficiency.

The performance of restricted estimators such as Almon and Shiller in modeling advertising carryover is tested and compared to the unrestricted OLS estimator, using 1971–1988 monthly New York City fluid milk market data. Results indicate that in the absence of autocorrelation and multicollinearity among the lagged advertising variables, the unrestricted OLS estimator is still the preferred estimator, based on Mean Square Error and Root Mean Square Percent Error criteria. In this case, the Almon and Shiller estimators perform equally well, although next only to the OLS estimator. In the presence of autocorrelation or multicollinearity however, the restricted estimators may outperform the OLS estimator, in a MSE sense, with the flexible Shiller estimator (which subsumes the Almon) being more desirable.

Experimental markets can be a useful tool to guide and evaluate environmental policy. This paper reviews four experiments to illustrate. Two institutional experiments are considered—Coasian bargaining with positive transaction costs, and a gaming experiment of dynamic choice in a conflict. Two valuation experiments are also discussed—the impact of sequential reduction mechanisms on the value of risk, and experimental auction markets to elicit the value of safer food.

Since 1980, incremental state and national policy decisions concerning public higher education have had a variety of effects on students and institutions. Although there has been very little research, most of these effects appear to be detrimental to the health of the system of public higher education and to the nation's stock of human capital. A thorough economic analysis of the effects of policy changes on public higher education is needed to guide the system into the 21st century.

Various methods have been used to estimate risk indices with historical data. An industry perception of increasing milk price risk over time provides a standard for evaluating several techniques used to measure historical risk. Risk measures from a regression model and an ARIMA model were consistent with the perception of increasing risk.

A dynamic model of the U.S. apple industry, including relationships for bearing acres, production, utilization, and allocation to the fresh, canned, frozen, juice, dried and other markets, is specified. Demands for each of these markets are modeled. Model coefficients are obtained using Zellner's seemingly unrelated regression procedure and data from 1971 through 1990. Elasticities and flexibilities are compared with other studies. Projections indicate that price fluctuations will continue in the industry when acreage is held at 1990 levels. A ten percent increase in fresh exports strengthens all apple prices. However, a ten percent decrease in the price of juice imports mitigates some of this effect.

Supply functions, elasticity estimates, and nonjointness test results consistently indicated that few commodities compete economically in the production of six major Texas vegetables (cabbage, cantaloupes, carrots, onions, potatoes, and watermelons). Significant bias effects caused by government-supported commodities, fixed inputs, and technological change were observed and measured. Nonnested test results for the hypothesis of sequential decision making by vegetable producers were inconclusive, but they gave greater likelihood support to sequential than to contemporaneous decision making.

This study investigates the effects on the U.S. cotton industry of textile trade liberalization using a multi-market equilibrium displacement model. The simulation results suggest that textile trade liberalization would induce small changes in the total demand for U.S. cotton but would affect considerably U.S. cotton demand structure, making U.S. cotton growers more dependent on world markets. The welfare analyses reveal that textile trade liberalization would result in a small welfare loss for U.S. cotton producers. As expected, textile trade liberalization also would lead to considerable substitution of imports for domestic production and substantial declines in prices of all textile products.

This paper examines the economic impact of selected farmland characteristics on the appraised value of development rights. Price elasticities are estimated for the size and location of farmland parcels, the amount of road frontage, the existence of panoramic views, and the distance to urban centers. Estimated elasticities suggest that parcel characteristics have a substantial impact on the cost of preserving farmland. For example, the per-acre cost of development rights is estimated to be 53 percent higher on farmland parcels that have a panoramic view of water than on parcels that have no water view. Similarly, the per-acre cost of development rights on a typical 25-acre farm is estimated to be 90 percent higher than on a typical 150-acre farm. Results suggest that the net social benefits obtained through farmland preservation programs may be enhanced by considering the impact of farmland characteristics on the marginal costs of purchasing development rights, when selecting among a set of candidate farms.

Many countries of the Western Hemisphere in recent years have shown interest in participating in preferential trading arrangements (PTA) in anticipation of expanding exports. Results in this paper show that export expansion depends upon the type of agreement that is formed and who else is participating. Trade of two agricultural commodities are examined; wheat, and fruit and vegetable juices. Five PTAs are examined, each including the United States and one or more Western Hemisphere countries.

The extent to which individual factors influence the adoption of sustainable agricultural practices is estimated using a logit model and data from a 1990 survey of West Virginia producers. The results are, as expected, different than those for conventional agricultural technologies. For example, the effects of human capital characteristics are significant, while those for structural and institutional characteristics are not. However, the likelihood of adoption of sustainable agricultural practices is affected most by the environmental characteristic of whether or not the producer is aware that ground water contamination exists on his farm. This creates an important “awareness effect” upon which policies to promote sustainable agriculture adoption can be formulated. It also implies the existence of a derived demand for sustainable agriculture.

This paper examines the impact of PST on the optimal production/marketing decisions of a grow-finish hog farm operation. The analysis evaluates PST from three angles: the feed efficiency effect, the leaner meat price effect, and the aggregate-supply-induced price effect. When limited to the feed efficiency effect only, the primary response to the new technology is to increase the animal turnover rate of the operation. When the leaner meat price effect is also included, marketing weight increases while turnover rate remains relatively unchanged. Additionally, if the increased aggregate supply depressed the market price by more than 10%, the benefits from improved feed efficiency and leaner meat will be completely dissipated. Aggregate price adjustments (reductions) of less than 10 percent maintained positive producer benefits resulting from improved feed efficiency and leaner meat.

With the rapid increase in consumption of some livestock products in Indonesia, expansion of domestic production of these commodities may enhance smallholders' incomes, increase rural employment and add to the country's trade balance. Policy analysis matrices (PAMs) were constructed to estimate divergences between private and social costs and returns in poultry and pig production in selected regions of Indonesia. In each case, producers' use of capital was subsidised but feed input private costs exceeded social values, and output prices received by producers fell short of values based on world prices. Production of all products as import substitutes was socially profitable, but in many instances private returns to farmers were negative. Product price and feed cost divergences were the major policy-induced distortions. Reform of these policies was estimated in a static partial equilibrium framework to lead to supply expansions of each livestock product, a contraction in livestock product consumption, and therefore additional net foreign exchange earnings from the poultry and pig sectors of around $320 million.

Lesser developed countries (LDCs) serve as both customers and competitors for agricultural commodities produced in the Southern region of the United States. This paper focuses on the impacts of LDCs on exports of the major agricultural commodities produced in the South (cotton, rice, tobacco, poultry, and, to a lesser extent, citrus and peanuts). First the importance of LDCs as export markets for Southern commodities is explored. Then the role LDCs play as producers and exporters of these commodities is considered. Finally, these separate roles are combined into an index of LDC competitiveness with Southern agricultural commodities. Data analysis shows that Southern agricultural interests truly are divided over the role LDCs play in Southern agriculture, where poultry and rice rank highest, and peanuts lowest, in terms of a LDC markets/competition index. Thus, it is not surprising that calls for protectionism (e.g., the Bumpers' Amendment) should arise from the South.

Opaluch and Just reported the top 20 departments in pages per faculty of articles in the American Journal of Agricultural Economics for the five year period 1968–1972. To determine how much has changed and how much has not during the intervening two decades, the analysis was repeated for the five year period 1988–1992. Some things seem not to change. University of California, Berkeley, remains at the pinnacle twenty years later. And 13 of the top 20 departments two decades ago, remain there during the 1988–1992 period. But seven did change, and the most notable aspect is that the number of Northeast departments in the top 20 rose from two to five.

This paper presents a model of the farm labor allocation decision based on risk and return characteristics of different activities. It is shown that off-farm employment can play an important role in the diversification of farm family income, implying that portfolio models of risk and return to farm activities should take into account the possibility of off-farm employment. A model of the labor allocation decision based on the risk and return characteristics of each activity is developed and tested using a state level cross section of the United States over the post-war period, and performs well in explaining variation in reliance on off-farm income.

This article reviews and critiques the frontier literature dealing with farm level efficiency in developing countries. A total of 30 studies from 14 different countries are examined. The country that has received most attention is India, while rice has been the most studied agricultural product. The average technical efficiency (TE) index from all the studies reviewed is 72%. The few studies reporting allocative and economic efficiency show an average of 68% and 43%, respectively. These results suggest that there is considerable room to increase agricultural output without additional inputs and given existing technology. Several of the studies reviewed have sought to explain farm level variation in TE. The variables most frequently used for this purpose have been farmer education and experience, contacts with extension, access to credit, and farm size. With the exception of farm size, the results reveal that these variables tend to have a positive and statistically significant impact on TE. This paper shows that considerable effort has been devoted to measuring efficiency in developing country agriculture using a wide range of frontier models. Despite all this work, the extent to which efficiency measures are sensitive to the choice of methodology remains uncertain.

This paper analyzes the determinants of variation across industries in levels of intra-industry trade (IIT) for a sample of thirty-six U.S. processed food and beverage industries in 1987, previous studies of intra-industry trade having focussed on industry characteristics in the manufacturing sectors. The determinants predicted by IIT theory are measures of product differentiation, economies of scale, and imperfect competition; the results of this analysis indicate that IIT variation across the food and beverage industries is positively related to product differentiation, economies of scope, and similarity of tariff barriers among trade partners, but negatively related to industry concentration.