Why do farmers behave as they do? : understanding compliance with rural, agricultural, and food attribute standards

Agricultural production experiences a shift in underlying institutions during the last years. The importance of private stakeholders like retailers, processors, consumers as well as tax payers is emerging. Eligibility for single farm payments and marketing of products is linked to compliance with diverse codes of practice and standards. Voluntary certification schemes are not only relevant with respect to agriculture's traditional activity (i.e. food production), but are also highly relevant in the case of rural policies. Examples are the EU's agrienvironmental schemes, aimed at preserving biodiversity, landscape elements, etc., which are characterized by voluntary participation and the contractual commitment to apply certain standards. These relationships, however, are characterized by strong information asymmetries. Economic literature offers several approaches to analyse similar relations. The classical approach is based on the assumption of utility maximising agents that will comply with rules as long as the net utility of compliance will be higher than the net utility of an offence. Recent evidence challenges this result. Experiments show that people behave more honestly than the classical deterrence model predicts. The main objective of the paper is to compare the various approaches to explain compliant behaviour. Additionally, an outlook for empirical applications of the theoretical framework developed here is given to motivate further research. However, our outlook shows that the selection of appropriate variables to analyse compliance empirically is open to debate.