A GROUP INCENTIVE PROGRAM FOR FARMER ADOPTION OF BEST MANAGEMENT PRACTICES: AN APPLICATION TO THE NITRATE POLLUTION PROBLEM IN CENTRAL ILLINOIS

The paper demonstrates a group incentive program to encourage farmer adoption of best management practices. It is demonstrated that the best management practices may not actually reduce farm profits but may increase farm profits and reduce environmental pollution. This may bring about a win-win situation for sponsor, the farmer participating in the program, and the society as a whole. The results show that the farmers subjective beliefs about response of corn yields and profits to nitrogen application differ from the simulated responses which in turn results in the willingness-to-Accept for adoption best management practices significantly higher than the expected program payments. The program could be implemented as an educational effort to demonstrate the benefits of sound management practices for larger adoption in the long run.