Optimising the effect of policy instruments: a study of farmers' decision rationales and how they match the incentives in Danish pesticide policy

Economic modelling generally assumes that businesses are profit maximisers. However, behavioural economics holds that businesses pursue multiple objectives and may even sacrifice some profit. This has implications for the effectiveness of incentive-based environmental policies. Using Danish farmers as a case, this paper examines whether non-economic rationales may trump economic ones in farmer decisions, and, unlike previous research, we quantify how widespread non-economic values are compared to more economic values. Data derive from a survey (1164 responses) of Danish conventional farmers' decision rationales regarding their use of pesticides. Using cluster analysis, we show that some farmers are more economically motivated while other farmers are more focused on optimising yield and pay less attention to expenditures and crop prices. Furthermore, we find that the two groups differ in their response to policy instruments; farmers who focus on yield indicate less responsiveness to economic policy instruments. The results imply that it is important to implement a broad array of policy instruments to match different farmer rationales.