Tax or green nudge? An experimental analysis of pesticide policies in Germany

Abstract

Abstract We use a business management game to investigate how a pesticide tax and a green nudge affect crop, tillage and pesticide decisions for a virtual farm. Results from German farmers reveal that both policies can reduce pesticide applications. The pesticide tax involves a substantial profit loss. Unlike in the green nudge scenario, participants under pesticide tax adjust their cropping and tillage strategies. We compare farmers’ decisions to those made by a mathematical programming model. Assuming profit maximisation would overestimate farmers’ response to the tax and underestimate the effectiveness of the nudge.