TOWARD THE EFFICIENT PRODUCTION OF THE DISCOMMODITY OF ANIMAL ODOR: A HEDONIC PRICE APPROACH TO ECONOMIES OF SCALE

Controversy surrounding confined animal feeding operations (CAFO) is becoming more commonplace. In several regions of the country CAFOs and local residents have had disputes over odors emanating from these operations. Viewing the CAFO as jointly producing products with utility (e.g., meat) and disutility (e.g., foul odor), it is possible to determine an efficient level of production for both products that is market-based. The authors propose a hedonic price model based upon real-estate transactions adjacent to CAFOs to establish a market-based estimate of the degree and extent of odor disutility. Using the results of the hedonic model, the authors suggest that a simple model of odor dispersal can be used to address the issue of economies of scale and the production of the disutility odor. Specifically, the final outcome should reveal if there is more or less disutility produced with an industry that is intensively or extensively managed.