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

The paper presents a group incentive program aimed at encouraging farmer adoption of best management practices. It is demonstrated that these practices not only do not reduce farm profits, but may increase them and reduce environmental pollution, benefiting both the sponsor, participating farmers, and society as a whole. However, farmers' subjective beliefs about the response of corn yields and profits to nitrogen application differ from the simulated responses, resulting in a willingness-to-accept adoption of best management practices significantly higher than expected program payments. The program could be implemented as an educational effort to demonstrate the benefits of sound management practices for broader adoption in the long run.