Preprint Article Version 2 NOT YET PEER-REVIEWED

Understanding Farmers’ Decision Making in Agricultural Water Fee Payment in China: The Role of Mental Accounting

  1. School of Economics and Business Administration, Chongqing University, No. 174 Shazheng Street, Shapingba District, Chongqing 400044, China
  2. Postdoctoral Research Station, Chongqing Rural Commercial Bank, No. 10 Yanghedong Road, Jiangbei District, Chongqing 400020, China
  3. School of Management, Sichuan Agricultural University, No. 211 Huiming Road, Wenjiang District, Chengdu 611130, Sichuan, China
  4. School of Economics and Management, Southwest University, No.2 Tiansheng Road, BeiBei District, Chongqing 400715, China
Version 1 : Received: 5 August 2016 / Approved: 5 August 2016 / Online: 5 August 2016 (08:08:19 CEST)
Version 2 : Received: 24 August 2016 / Approved: 25 August 2016 / Online: 25 August 2016 (10:12:08 CEST)

How to cite: Zhang, W.; Fu, X.; Lu, J.; Zhang, L.; Michael, K.; Liu, G.; Liu, Y.; Yang, F. Understanding Farmers’ Decision Making in Agricultural Water Fee Payment in China: The Role of Mental Accounting. Preprints 2016, 2016080049 (doi: 10.20944/preprints201608.0049.v2). Zhang, W.; Fu, X.; Lu, J.; Zhang, L.; Michael, K.; Liu, G.; Liu, Y.; Yang, F. Understanding Farmers’ Decision Making in Agricultural Water Fee Payment in China: The Role of Mental Accounting. Preprints 2016, 2016080049 (doi: 10.20944/preprints201608.0049.v2).

Abstract

To better understand farmers’ refusal and corresponding negative emotions to pay agricultural water fee under current policy in rural China, this paper applies mental accounting, a behavioral economics framework, to explore how the governmental policies of reform of rural taxes and fees, direct agricultural subsidy programs and agricultural water fee individually influence farmers’ decisions in paying agricultural water fee. Using fieldwork data from 577 farmers and 20 water managers in Sichuan, we explore farmers’ information processing regarding paying agricultural water fee via three sequential mental accounting processes, with the associated underlying principles and measures behind each process. We find that the information processing in three mental accounting scenarios related to the agricultural water fee elucidates farmers’ observed behaviors in rural China. Generally, in the three mental accounting scenarios, two conditional intuitive expectations and nine conditional intuitive preferences are formed, however, the conditions of those expectations or preferences cannot be matched with the facts due to the reform of rural taxes and fees, the direct agricultural subsidy programs and the internal attributes of agricultural water fee, which interpret those negative behaviors in rural China. Additionally, this paper offers a view into how previous policies create negative psychological externalities (such as farmers’ psychological dependence on the government) through mental accounting to negatively influence agents’ subsequent decision making; it highlights the significance of underlying mental factors and information processing of negative behaviors in policymaking for managing or conserving common pool resources.

Subject Areas

mental accounting; agricultural water fee; behavioral economics; decision making; information processing; representativeness; negative psychological externalities

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