Mental Decision Making On Farmers’ Payment Behaviors Of Agricultural Water Fee

Agricultural water saving is playing an indispensable role in resolving the increasingly severe water crisis that China is facing.In recent years,the emphasis on agricultural water saving is transferred from technology to combination of technology and institution with a neck to neck pace.Currently,charging agricultural water resources is one of the most significant economic instruments for saving in developing and developed countries.However,the indisputable fact is that a large number of developing countries are facing a dilemma that the collection rates always are remaining low than expected.This case is particularly salient and special in China.Since 2006,China had accomplished its Rural Tax and Fee Reform(RTFR),at that time,the collection rate was suddenly declined,and the WTP of farmers was suddenly decreased.The conflict behaviors were obviously observed among farmers,and they also sometimes are showing some negative emotions,such as discontent,complaints and anger when facing such payment.This study will refer those behaviors as anomalies or anomalous behaviors.Yet,given the increasing per capita income of farmers,the intensified agricultural subsidies,decreasing burden on farmers and the lower agricultural water price,those anomalous behaviors are indeed unintelligible.For the time being,agricultural water fee(AWF)is now putting into the only administrative charging item in rural area.In this case,farmers" payment behaviors and attitudes to AWF are becoming one of the headaches that hinder the smooth operations of rural works.Besides,it is one of the issues that we must address in terms of expanding the scale of agricultural water pricing reform China is executing.Currently,the existing research works did not specifically and systematically analyze this phenomenon of farmers’ anomalies.Some other works also did not deeply touch the reasons for those behaviors comprehensively.This thesis is committed to resolve this issue by using mental accounting(MA)theory that is from behavioral economics and combines psychology and economics from perspective of mental decision-making mechanism.We will come up with explanations,empirical demonstrations and improvement programs.This thesis aims at two objectives:First,it will clarify the mental decision-making mechanism when farmers paying AWF,so as to offer interpretations for those anomalies with empirical evidences.Second,it will identify the resolutions that could modify those anomalies and offer some empirical evidence from perspective of microscopic decision-making.By doing so,we could offer some implications for implementation of agricultural water pricing reforms.In order to reach the targets above mentioned the core work of this thesis is divided into two parts,namely Chapter 3 to Chapter 6.The first part is explanation and demonstration.In this part,incorporating the sampling survey data,we validate the application of MA and its structures in group of peasants.Then,we integrate this theory into the decision-making process as the analytical framework,and respectively investigate AWF’s decision making rules in each process(categorical editing and mental budgeting)with empirical evidence.We as well provide some empirical evidence to test the mental results of AWF through MA decision making from perspective of reference point using methods of willingness to pay.The second part is the strategy,mainly containing Chapter 7.In this part,we design some programs,from perspective of psychological decision-making in terms of rules of MA,that can nudge farmers to promote their behaviors in paying AWF by drawing on this theory and previous research works in this thesis.We conducted experiments and offer those designed programs empirical validation in order to propose some countermeasures.The data involved in this study was mainly gained by experiments and survey from farmers among 33 irrigation districts in 20 counties at Sichuan.Main conclusions of this study are as follows:(1)Psychological reasons for those anomalies.This study argues that the AWF has experienced categorical editing(CE)and mental budgeting(MB)in the decision-making process of MA.In process of CE,when facing the AWF payment,they will open the channel of MA,starting to edit the AWF.Finally,in the first place,farmers may potentially put the AWF and Rural Tax and Fees(RTF)together psychologically,forming a JRA-MA(Joint Rural Tax and Fees and Agricultural Water Fee Mental Accounting);in the second place,farmers may potentially place AWF and Agricultural Subsidies(AS)together,forming a JAA-MA(Joint Agricultural Subsidies and Agricultural Water Fee Mental Accounting);due to the individuality and uniqueness of AWF,farmers as well potentially single out the AWF,forming a separate SAWF-MA(Single Agricultural Water Fee Mental Accounting).In process of MB,each of five rules of MB(reference dependence expectations,standard theory,open depreciation,loss aversion and the endowment effect)will have an impact on the budgeting of AWF in the JRA-MA,which will facilitate farmers to formalize a lower reference point for paying AWF.Additionally,the both rules of reference dependence expectation and standard theory will render farmers to have an expectation on AWF(canceled),which is not compliance with reality,furtherly pushing farmers to show negative emotions such as discontent,anger and complaint.Also,in JAA-MA,both rules of reference dependence expectation and standard theory will render farmers to have an expectation on AWF(subsidized),which is either not in accordance with reality,inducing their negative emotions as aforementioned.Still,in SAWF-MA,each of four rules of MB will have an impact on the budgeting of AWF,which will facilitate farmers to form a lower reference point for paying AWF.The mental decision-making mechanism in above three MAs for AWF preferably interprets the reasons why the anomalies of AWF payment will happen to farmers in China.And we summarize this mental mechanism model and describe it as Figure 5-1 in this study.Simultaneously.not only do those three MAs play a role by means of independent variables,but play a role through interacting with external variables(e.g.Rural Tax Reform and agricultural subsidies)as the mediator.Importantly,the mains reasons that result in those anomalies are closely related to the governments and the governmental policies implemented recently.(2)Test of the mental decision-making results of AWF.Statistics of the sampling area shows that the AWF reference point of a majority of farmers(92.06%)is below the realistic amount required to be paid,which furtherly demonstrate the mental reasons for anomalies of farmers’ AWF payment behaviors via empirical data.Because the psychological reference to some degree represents their willingness to pay(WTP),when psychological reference is below the counterpart,some negative behaviors happen.And among those reasons why farmers are not willing to pay for AWF,reasons chosen by farmers relating to governments and governmental polices occupy 93.73%,which indicate that currently the governments and governmental polices are the main contributors to those anomalies.Regression of the sampling area shows that non-psychological factors,such as personal and economic characteristic variables,will also influence farmers’ decision making for AWF.For instance,level of education and rice income has a positive impact,level of household expenditures has a negative impact,and the WTP of women is stronger than that of men.And those factors also indicate some dynamic relationship with the AWF reference point.(3)Modification strategies for those anomalies.Through the latest literature review and summary,our findings indicate that we could use conceptualization of nudge and choice architecture to design new programs to help farmers ameliorate their anomalous behaviors in paying AWF.Specifically,the nonfungibility and hedonic editing of MA can be our equipment for new programs.The experimental data from sampling area is the further perfect evidence for our programs,which also suggests that if we would like to ameliorate their anomalies,we could realize this target through a complementary and comprehensive combination of price boosting and income raising program.Due to the influence of MA,the income raising program needs to meet the following conditions:use transfer approach such as subsidies,closely link to agricultural water resources,set it up nationally.Our findings also indicate that when those two programs are implementing comprehensively,some specific requirements are needed,including the size relationship,sequence and time span in terms of separately enforcement,implementation patterns and frequency and the available regions.Those factors are critical to the effect of those two programs if implemented.It is because of the impact on Hedonic Editing,namely,both programs are preferred to be integrated temporally by famers,and both programs are more likely to exhibit non-self occurrence and virtual currency preference.Therefore,both programs should be adversely designed according to the rules of Anti-hedonic Editing at the temporal and spatial levels.Specifically those two programs should meet the following requirements:①The income program could modify the current subsidies from implicitly to explicitly,however,this program should be highly related to or similar with agricultural water and executed by the top government.For instance,the income program could be set up as a national subsidiary program that directly connects to farmers.②Those two programs should be implemented separately rather than simultaneously.However,the time interval between those two programs should not be too enormous.Additionally,price boosting program should be executed before the income subsidiary program,③The magnitude of both income subsidiary program and price boosting program should not be overly large.Nonetheless,the subsidiary magnitude could be higher than that of price boosting program.By reviewing the amount and trend of agricultural subsidies in China recently,it is beyond a doubt that this subsidiary program is feasible.④The current charging frequency,one time annually,is too low.We could properly increase this low charging frequency under the choice architecture of this study.Notwithstanding,considering the transaction costs in collecting AWF,the frequency increased could not be too higher.⑤It is more than better to apply the currency trading in both programs if possible.Even though the subsidiary program is quite hard to apply currency,the charging of AWF should be done in the form of real currency and offer some clear and easy-understanding bill or electronic messages to inform farmers who pay AWF.⑥We are supposed to regulate that more WUAs play the role in collecting AWF rather than more units that are tightly related to the governments.The time interval between consuming water and paying AWF should be compressed.For instance,the existing interval is one to three seasons,which could be compressed or modified to non-interval.The approach of consuming before but paying after in implementing AWF should be changed.It would be more than good if consuming and paying could happen simultaneously.⑦Those choice architectures are only effective in areas apply volumetric pricing in AWF.Therefore,on the ground of current comprehensive reforms on agricultural tariffs,we should enhance the intensity and scope of this reform and expand the area using volumetric pricing.(4)Some policies that benefit agencies may potentially create some negative mental externalities for the implementation of the follow-up policies.In the long run,such mental negative externality of agencies will negatively affect them to fulfill obligations.Therefore,being it policy making or reform of agricultural water institutions,focusing on their mental mechanism of the previous executed policies is essential.(5)Totally,the quality of people in China is not so high enough that irrational behaviors are commonly observed and prominent.For the future research and practical application,the behavioral economics and its theories should be especially considered with more attention in terms of farmers’ behaviors,resource utilization and environmental protection.The main innovative summaries are as follows:(1)This thesis firstly in China applies MA from behavioral economics to look at farmers’ mental behavioral mechanism,which extends and contribute to the exsiting literature relating to the interdisplinary research of behavioral economics and agricultural economics,and offers some new evidence and applications from mental decision making for the research of farmers’ behaviors(2)This thesis firstly in China applies MA from behavioral economics to resource economics,especially water resource,which extends and contributes to the paradigm of current literature,and offers a new way relating to the interdisplinary research of behavioral economics and resources economics from perspective of mental decision making.