Mechanism design theory is used to characterize the properties of a least-cost CRP. If marginal land rents decrease with acres farmed then a least-cost CRP is a set of nonlinear price schedules. If marginal land rents are independent of acres farmed then an offer system constitutes a least-cost CRP. The least-cost offer system gives a useful estimate of the upper bound of a least-cost CRP. Empirical results suggest that a 34-million-acre CRP should have cost no more than $1 billion per year.
The Conservation Reserve Program as a Least-Cost Land Retirement Mechanism
American Journal of Agricultural Economics
Rodney B.W. Smith
Ames, IA: American Agricultural Economics Association
February 01, 1995
Conservation Policies and Programs