Infectious Disease, Productivity, and Scale in Open and Closed Animal Production Systems

Posted: 16 Feb 2007

See all articles by David A. Hennessy

David A. Hennessy

Iowa State University - Department of Economics

Jutta Roosen

Technische Universität München (TUM) - TUM School of Management

Helen H. Jensen

Iowa State University - Department of Economics

Abstract

Trade in feeder animals creates externalities when animal diseases can spread beyond the purchasing farm. If growers choose between open and closed production systems, then Nash equilibrium likely involves excessive trading. While first-best equilibrium involves market-wide adoption of either an open-trade or closed-farm system, equilibrium may entail heterogeneous systems. If so, then the feeder trade should be restricted. Supply response to an increase in marginal costs may be positive. Within a farm, infectious disease risk can create decreasing returns to scale when the technology is otherwise increasing returns. Contractual procurement and damage control technologies will likely increase scale in finishing.

Suggested Citation

Hennessy, David A. and Roosen, Jutta and Jensen, Helen H., Infectious Disease, Productivity, and Scale in Open and Closed Animal Production Systems. American Journal of Agricultural Economics, Vol. 87, No. 4, pp. 900-917, November 2005, Available at SSRN: https://ssrn.com/abstract=963672 or http://dx.doi.org/10.1111/j.1467-8276.2005.00777.x

David A. Hennessy (Contact Author)

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States
515-294-6171 (Phone)

Jutta Roosen

Technische Universität München (TUM) - TUM School of Management ( email )

Freising
Germany

Helen H. Jensen

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States
515-294-6253 (Phone)
515-294-6336 (Fax)

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