Conference Agenda

When farmers in cooperatives make joint investments in new technologies, they are exposed to both strategic uncertainty (i.e. behavior of other farmers) and market-price risk (i.e. stability of remunerative conditions). To better disentangle their impact on farmer coordination, we model the interaction between strategic uncertainty and market-price risk in an adapted stag hunt game, where cooperation exposes individuals to payoff variability but remains beneficial in expected value terms. Our 2x2 experimental design varies across treatments: low vs. high price volatility, and social vs. individual conditions. The design was motivated by cooperative biomethane investment but presented as an abstract game. Our sample includes Costa Rican coffee farmers (n = 222), a relevant group because biomethane development in the coffee sector depends on collective participation. We find that cooperation declines significantly when high price risk is combined with strategic uncertainty. In contrast, price risk alone does not significantly affect individual decisions, and strategic uncertainty under low price risk does not reduce cooperation. This suggests that farmers are able to tolerate payoff variability when decisions are individual, and they appear able to coordinate with others when returns are relatively stable. The findings suggest that price stabilization may be particularly relevant for collective investment projects, where participation depends on both expected returns and confidence that others will also participate.