Strategic Risk and Collective Action in Agriculture

Ariel Singerman and Sergio H. Lence

Collective action is advocated as a solution to common challenges encountered by agricultural producers, including accessing new markets, sharing capital investment expenses, and negotiating with companies both upstream and downstream in the supply chain (Bouamra-Mechemache and Zago 2015). Collective action is also proposed as a solution to problems related to externalities and public goods within the agricultural community and between farmers and other economic actors (Ayer 1997). Recently, there is growing interest in utilizing collective agri-environmental strategies to efficiently deliver public goods, such as biodiversity, water availability and quality, resilience against fires and flooding, storage of carbon to reduce greenhouse gas emissions, and enhanced agricultural landscapes (Vanni 2014). 

A major hindrance for the adoption of collective action, however, is its inherent nature of public goods, which are characterized by non-excludability and non-rivalry and create the potential for opportunistic behavior. The core issue at hand, which at the same time introduces risk, is that individual's rewards are contingent not only on their own actions but also on the actions of others. Strategic risk occurs when agents’ beliefs regarding the actions of other individuals influence their choices. Contrastingly, non-strategic risk refers to situations where the actions of others do not affect agents’ decisions. 

As a case study, we examine voluntary pest control, which can be seen as a collective-action problem similar to contributing to the provision of a public good. The agricultural economics literature has not given enough attention to the effect of uncertainty on the overall effectiveness of collective action endeavors, as well as the opportunity costs associated with alternatives to collective action. In this regard, it is crucial to note that since the probabilities associated with strategic risk rely on individuals’ beliefs about the decisions made by others, in principle it should be possible to design policy interventions aimed at influencing the beliefs of participants in collective action. By doing so, it would become feasible to impact the likelihood of success in collective action initiatives.

Employing collective action as an approach to control pests

Since the 1950s, the introduction of synthetic pesticides has provided farmers with a cost-effective and efficient means of pest control within their own farms, independent of the opinions and actions of their neighbors (Hendrichs et al. 2007). Consequently, individual chemical pest management has become the predominant approach in pest control. However, despite the extensive use of chemicals, an estimated 10%–35% of crop production in the United States still suffers losses due to pest damage (Pimentel et al. 1993).

One significant concern regarding the practice of individual chemical pest management is that the mobility of pests undermines the effectiveness of the approach (Hendrichs et al. 2005). Consequently, focusing solely on site-specific pest management neglects the collective aspect of the problem (Perrings et al. 2002). 

Because of the recurrence of pest infestations from neighboring farms, the actions taken by farmers at the individual level have minimal impact on the pest density in future periods (Lazarus and Dixon 1984). As a result, from an economic standpoint, individual pest management creates an externality that leads to a divergence between private and social optimal outcomes (Regev, Gutierrez, and Feder 1976). In particular, individual management leads to less pest control than would be optimal when viewed from the perspective of society as a whole (Miranowski and Carlson 1986). Achieving effective control of mobile pests relies heavily on the actions of neighboring farmers. This characteristic highlights the problem as a collective-action dilemma, where there are tradeoffs between individual and collective interests. By adopting collective pest control approaches, such as area-wide pest management (AWPM) programs, to deal with the externalities associated with individual pest management, it may become feasible to achieve an outcome closer to the socially optimal one.

"When it comes to pest control, the objective of government regulation should be to encourage producers to adopt pest control practices that align more closely with the social optimum."

Usually, collective-action dilemmas are addressed through either top-down regulations or bottom-up approaches. When it comes to pest control, the objective of government regulation should be to encourage producers to adopt pest control practices that align more closely with the social optimum. In theory, an ideal policy approach would involve imposing taxes on the usage of pest control chemicals to account for its social costs (Waterfield and Zilberman 2012). Alternatively, a government regulation could establish a quota on the total amount of pest control treatment allowed, set at the socially optimal level, and enable farmers to trade their treatment rights amongst themselves. However, taxes and quotas are often impractical for addressing pesticide externalities due to the diverse environmental and human health effects of pesticides, which may vary across farms and regions. In addition, the environmental costs associated with pesticide pollution are influenced by the spatial and temporal aspects of pesticide applications. Furthermore, the non-point source nature of pesticide pollution poses a challenge for implementing efficient policies, as monitoring expenses are often high and identifying the precise sources of pollution is rare (Sexton, Lei, and Zilberman 2007). Consequently, the difficulties involved in devising market-based policies make command-and-control approaches, where the government determines the permissibility and conditions of specific treatments (Zilberman and Millock 1997), an attractive alternative.

All forms of chemical pest control contribute to the creation of pest resistance externalities, because the stock of treatment efficacy is a shared resource accessible to all farmers in a particular region (Regev, Gutierrez, and Feder 1976). This common availability of treatment leads to an externality, as the usage of treatment by one farmer affects other farmers without compensating them. In the absence of regulation, excessive utilization and subsequent development of resistance are outcomes to be expected. Due to the presence of numerous such potential externalities, it might be more advantageous to make pest management decisions at the regional level rather than the individual farm level. When growers collaborate on pest control efforts, they can internalize externalities and enhance the efficiency of pest control measures. As a result, a bottom-up approach may become appealing, particularly when considering the financial limitations of governments, the challenges associated with implementing top-down regulations, and the high costs and enforcement difficulties that typically arise with top-down regulations in agricultural contexts (Ayer 1997; Ervin and Frisvold 2016).

While a community-based approach to address collective-action challenges can be more effective and lead to reduced transaction costs compared to command-and-control or payment-based approaches (Ostrom 2010), the absence of suitable institutions or incentives to encourage farmer participation may hinder the adoption of cooperative solutions (Loehman and Dinar 1994). A major challenge for establishing institutional capacity is that it requires a significant amount of time (Ervin and Frisvold 2016). However, the risk of pest invasions depends on how humans respond to the threat (Perrings et al. 2002). As a result, the timeframe required to establish institutions and cultivate trust among stakeholders for a centralized collective-action response differs significantly from the urgent response needed to address the immediate danger presented by a plant pathogen.

In certain situations, there may be benefits in initially adopting a faster yet temporary decentralized collective action strategy, such as a voluntary AWPM approach, as a means of bridging the gap until the establishment of appropriate community-based institutions. This approach is particularly relevant when the policy response is likely to be more gradual, such as the case of plant diseases vectored by pests (which may be dealt with less urgency than, e.g., animal diseases, because they are not transmitted to humans). However, voluntary coordination encounters challenges akin to those associated with contributing to the provision of a public good, most prominently stakeholder participation. 

Participating in the provision of a public good, such as regional pest control by means of an AWPM program, carries inherent risks. The successful provision of the public good relies on achieving a critical mass of participants who cooperate. If this critical mass is not reached, the public good is not effectively provided, and those who contributed to it experience lower payoffs. Consequently, opting out becomes a safe strategy for an individual player, but it leads to reduced individual gains and a suboptimal social outcome. Hofstadter (1985) characterizes strategic uncertainty as “reverberant doubt,” which refers to the initial small doubts players have about the possibility of collectively attaining a more beneficial cooperative outcome. Over time, these doubts “reverberate,” ultimately eroding the individual player's initial commitment to the cooperative strategy and leading them to opt out instead.

The coordination frontier: A practical tool for AWPM

The coordination frontier developed by Lence and Singerman (2022) is a practical method for evaluating the likelihood of achieving success in a voluntary coordination program. The coordination frontier measures the impact of two key factors that contribute to the uncertainty involved in AWPM: (a) the extent to which a change in the coordination threshold affects the overall probability of successful coordination; and, (b) the extent to which the probability of successful coordination changes with increasing opportunity costs of coordination. By utilizing the coordination frontier, one can not only infer the circumstances necessary for different levels of voluntary coordination to be successful, but also determine the economic incentives required to facilitate its effectiveness.

"The coordination frontier may serve as a valuable tool in mitigating the strategic uncertainty associated with voluntary coordination programs."

The coordination frontier may serve as a valuable tool in mitigating the strategic uncertainty associated with voluntary coordination programs. By offering public information, it may help align beliefs among growers, ameliorate strategic uncertainty, and improve coordination. 

The collaboration of farmers through collective action plays a vital role in tackling not just the external effects stemming from neighboring farmers’ choices regarding pest control, but also those associated with pesticide resistance. The United States alone suffers approximately USD $9 billion in annual losses due to pesticide resistance (Palumbi 2001), a problem further exacerbated by the growing global dependence on pesticides. Nevertheless, there have been no new herbicides with alternative modes of action introduced in the past three decades (Gould, Brown, and Kuzma 2018). 

According to Ervin and Frisvold (2016), farmers perceive the management of resistance in mobile weeds to be dependent on the actions of their neighbors. This belief often discourages proactive resistance management. As highlighted by Dover and Croft (1986), pesticide resistance exacerbates the negative externalities associated with pesticide usage, because it leads to an increased reliance on pesticides to counteract the reduced susceptibility of pests. Furthermore, pesticide resistance can give rise to additional negative externalities. 

The negative spatial externalities resulting from the absence of collective action in pest control are notably more severe and challenging to address in the context of perennial crops. However, the risks and decision-making patterns stemming from strategic interactions to combat pests and diseases that impact different crops, as well as the rising issue of pesticide resistance in weeds, remain essentially the same for perennial as for annual crops.

Policy implications 

A fundamental feature of collective action is its characterization by strategic risk, which involves probabilities that rely on individuals' perceptions of the choices made by others. Consequently, policy interventions can potentially influence the prospects of success in collective-action endeavors by modifying the beliefs held by participants. One clear intervention approach involves enhancing farmers’ understanding of the economic advantages associated with collective action and providing them with information regarding the overall likelihood of success. An example of such intervention is the establishment of self-help groups, described by Desai and Joshi (2014) as organizations that aim to enhance social cohesion through a combination of educational efforts, access to financial resources, and connections to broader development programs. 

Singerman and Useche (2019) reinforce the idea that providing public information regarding positive outcomes has the potential to increase anticipated rewards and reduce uncertainties concerning the behavior of others. Consequently, social learning, wherein individuals acquire knowledge from observing the decisions of others, becomes instrumental in effectively managing externalities. Importantly, the social learning process can occur through extension activities, as they play a pivotal role in fostering collective action and, thus, contribute to enhanced social welfare (Singerman and Useche 2019).

Upcoming research

In the near future, we plan on collecting data from farmers in Iowa and Argentina to gain a better understanding of the factors, including strategic risk, that affect their preferences regarding whether to adopt individual versus collective action to combat the increasing and problematic spread of herbicide-resistant weeds.


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Suggested citation

Singerman, A., and S. Lence. 2023. "Strategic Risk and Collective Action in Agriculture." Agricultural Policy Review Fall 2023. Center for Agricultural and Rural Development, Iowa State University. Available at: