Voluntary Funding for Generic Advertising Using a Provision Point Mechanism: An Experimental Analysis of Option Assurance

The mandatory nature of check-off programs remains a contentious policy issue. A provision point mechanism with a money-back guarantee offers an attractive, alternative voluntary funding approach, yet faces the problem of how to maintain future administrative capacity should contributions fall short of the funding threshold in the present period. To address this concern, a novel two-threshold, provision point mechanism is tested that sets a high threshold to fund marketing and a low threshold, if necessary, to secure administrative capacity for future advertising. Experimental results demonstrate that providing such "option assurance" sustains high overall contributions and, in some settings, can increase producer surplus. Copyright 2007 American Agricultural Economics Association