Behavioural economics in the agricultural sector


The need to choose the behavioural economics that informs decision-making in the agricultural sector is due to contemporary society’s industries’ dynamics. This work’s inspiration emanates from the need to practice smart agriculture by slowing shifting the farmers’ mindset to adopt sustainable agricultural production practices. While researching this paper, it is vital to consider well-read and written journals that extensively cover this decision-making science. This is because the choices made commence success in every undertaking. The challenges in this research could be insufficient literature about the topic of discussion. The need to transition from the habitual behaviours to the newer sustainable ones needs a shift in perception and attitudes that help convince the individuals to accept change.


The decisions made in varying economic actors play a significant role in the development of sectors. The need to attain impoverishment in the regional customarily driven by the financial choices emanate from social interaction. More importantly, the economic outcome is related to the consumers’ psychological analysis and decision (Svensson et al. 2017, pp. 90). Some factors will attract consumers and make them choose one product over the other. Behavioural economics accommodates the individuals’ irrational choices provided that they get satisfied (Oliver Kasdan 2018). Emotional and cognition are highly considered in this field hence vital in managing organizations that require critical decision-making processes. This is to help identify the financial trends in the market and measure profitability and enhance consumer satisfaction. Notably, voluminous sales in the markets are attained by encouraging positive consumer buying behaviour and developing public policy to protect the customers. Economic models do not go in tandem with the people’s irrational choices and behaviour, hence allowing exploration of these aspects through psychology. In the agriculture sector, decision making yields to sustainability and profitability. As a result, the farm boundaries and social objectives of the farm produce are highly considered. In this paper, evaluating various behavioural economic insights that help in informed decision-making in the agricultural sector management will be discussed.

2.0 Behavioral economics significance in development policy

2.1 Factors affecting Behavior economics on decision making in the Agricultural sector

2.1.1 Personal factors

The key determinants of behaviour economics include gender, age, beliefs, attitudes and experience. These factors play a fundamental role in the decision making processes in farm management. Individuals with more experience in farming activities well-read are considered to be efficient in decision making. Such groups of people understand that the dynamics in technology come with the changes in the farm produce’s tastes and preferences. Profit maximization can, therefore, be achieved through considering such dynamics in the agricultural sector. Additionally, age is imperative in behavioural economics as it aids in putting in place precision agriculture and installing innovativeness in the industry. Young people have the energy to come up with new ideas to help in farm management growth. Considering the old system, mature adults’ decisions at the managerial level can be made because they have positive attitudes towards the industry (Alarcon et al. 2014, pp. 230). Personal values aid in combating risks that emanate from the management processes; hence, the organization’s emotional and cognitive stability are entitled to practical decision-making skills that nurture the business. Behaviour is also ascertained through the beliefs that individuals have concerning the company. When the stakeholders believe that the organization’s choices are worthy, there seems to be light at the tunnel’s end. The stable state of mind aids in accommodating an individual’s rational and irrational decisions in the agricultural sector.

2.1.2 Incentives factor

Rewards offered to the farmers significantly influence their behaviour in decision making. Highly motivated management team manifest change within the organization. Financial incentives insights offer solid grounds through effective decisions are made. Knowledge is richly invested in making the right choices in the environment that offers direct financial incentives(Liu, Bruins and Heberlin 2018, pp. 432). The executive department’s rewards level goes in line with the sustainable practices that the organization chooses to adapt to record maximum market value and profitability. The unique behaviour developed by motivated staff acts as a preamble of success in the agricultural sector.

2.1.3 Feeling in control of making the right choices

The management of an agricultural sector feels an entitlement to decision making when positive behaviour is nurtured. The freedom to implement the choices made in an organization creates a self-efficient executive team. It is often unlikely to have some things done when the staff is denied to take part in decision-making processes. The farmers should be left to take charge of their activities because they can execute them effectively. The outcome of this is a positive behaviour that protects other people’s emotions and enhances consumer satisfaction. The confidence that comes alongside sustainable decisions in the agricultural sector is essential in winning over the consumers’ needs. The education capabilities of the farmer support this. Literate farmers find it easy to implement things because they have a diverse knowledge of how effective the procedure can be. Making the farmers in charge of the decision-making processes logically nurture change and deliberative protocols that help consumer satisfaction. The positive impact that comes alongside being in control of the choices made is that a fair and long-term impression is made on the organization.

2.1.4 Social networks factors

Opinions from the friends and the family affect the decision-making behaviour of a farmer. Provision of informed advice can emanate from trusted and learned peers or family; hence, they are considered partakers of success in the organization. The ideologies of social pressure come out as a behavioural change aspect that presents upon involvement with groups of trusted people. More markedly, family and peers are responsible for shaping an individual’s behavior and attitude towards their purchasing power. Limiting the number of choices made by these groups of people serves as protective mechanisms towards behavioural biases. Instead of making mistakes in the decisions made, social networks should be instrumental in developing new methods, tools and strategies to enhance the agricultural sector. It is imperative to consider the elimination of decision fatigue through the adoption of behavioural economics. This is possible by reducing the choices that are made by the major stakeholders and limiting the rationality effects.

2.1.5 Business influencers

Business factors such as succession deliberations, cash flows, profitability, staff numbers and farm size are pivotal in impacting behaviour economics during decision-making processes. They are good predecessors of quality and long-term choices made in the organization. For instance, in an agricultural field, having a significant number of staff eases the implementation of changes, which yields to high income and profits. Owning a land offers an excellent ground to develop long-term plans because the individual’s concerns offer in charge decisions. The choice to use technology on the farm reduces farm labour and reduces money spending behaviour in the agricultural organization. Sustainability is consequently enhanced through the efficient decisions made to adopt the fast machinery in the fields rather than employ a significant number of workforces.  More pointedly, the availability of highly skilled personnel to work on the farm and operate the machines is responsible for changed organizational behaviour.

2.2 Farmer Behavioral and decision-making factors

2.2.1 Adoption of sustainable practices in the agricultural sector

Sustainable practices such as the growing of cover crops, restoration of hedgerows and organic farming are crucial farmer decisions that possess their peculiarities. Initially, the nudges, which were the behavioural insights, were applied to the farm, produce consumers. The decisions to adopt sustainable practices in the farm arena offer long-term economic and personal consequences and may involve long term investments that prove fruitful in the development of public policies( Tey et al. 2014, pp 20). In addition to this, these practices are better thought of and are controlled; hence great success is expected in the organization. However, biases, rationality, and heuristics are present in the farmers’ decisions who put into practice these practices.

2.2.2 Dispositional influencers

These relate to how one behaves as a result of a trigger or a motivating factor. These factors are behavioural immature, and they include risk tolerance, resistance to change, moral and environmental concerns. They take part in the decision making processes in the agricultural organization.

Resistance to agricultural dynamics

Reluctance to agree to the decision made predisposes farmers to fail in adopting the sustainable practices of farming. The indifferences customarily emanate from little exposure and failure of the staff to have experience in the farm (Wunsch 2019). The link to personality is evident in the management’s scarce information during the decision-making processes. It indicates that openness to the new changes is void in the organization. Biases of the status quo, from which the people want to continue keeping their current practices because they view dynamics as losses, also affect the farm enterprise’s decisions. The farmers possess strong inertia; hence they find it easy to reject sustainable practices as they view this as an expensive venture.

Tolerance to risks

This stands out to be an imperative aspect of behavioural economics. Risk tolerance influence on the farmers’ behaviour has impacted mainly on their capabilities to make decisions. Risk tolerance aspects include; crop diversification adoption, signing of insurance contracts related to crops, crop innovations and specific marketing strategies. The upsurge in the market volatility, extreme climate changes, low margins and high debt levels are other factors that greatly influence the type of choices to make in the farming enterprise (Seo 2017). Culture affects risk tolerance since the individuals living in collectivist culture are likely to be affected by the risks than those living in scarce settlements. More significant populations can curb problems and air out their views concerning risk, and a decision is reached to help enhance sustainability.

Environmental and moral concern

Moral concerns constitute ethical and personality grounds and the state of an individual.  In the agricultural sector, the people who uphold more astounding moral principles are considered viable and reproducible decisions in the organization. They have a good sense of agility in matters that are not right on the farm. For instance, they can correct the mistakes they see on other staff, which makes them valued at the institutions (Hermann 2018). The farmers who show great concern to the other people’s welfare are considered to show the same concern to the animals and the crops. In this regard, their decisions are considered positive because they want the best out of their work.

Environmental concerns are also important aspects that the management team should possess. The need to combat and prevent environmental problems targets putting the farming industry in a better place in future. This is proximal to the decisions made to put into practice sustainable farming methods. For instance, the farmers who value their environment will ensure that the water quality is ascertained (Mills et al. 2017, pp. 291). To do this, they come up with relevant decisions to grow cover crops and construct water reservoirs. The emotions that come alongside the need to protect nature are correlated to conserve any available crops or livestock on the farm. Pollution is, therefore, avoided as it comes as a personal responsibility to avoid environmental damage. Environment protection and morals go in tandem and offer commendable outcomes in the decision making processes.

Cognitive influencers

The farmers’ capabilities to understand, learn, and perceive the dynamics associated with the risks, costs, difficulties, and benefits are imperative in the decision-making processes. Whereas a particular sustainable practice may be considered costly and risky to invest in, another one may be cheap and have little risk, and the result would be the same. It is essential to have a knowledgeable troop of the management team to boost sales of the agricultural produce (Barnes et al. 2019 pp. 170). Ease of access to information meant to improve farming practices helps a great deal motivate the staff to work even more. This helps to cultivate a working and undying spirit to work amidst challenges. Assurance that the policies that govern the agricultural organization are installed puts the workers in a better position to work effectively and make the right farming choices. Consideration of the cognition factors in the farming enterprise during decision-making saves on time and costs incurred in conventional farming (Halbrendt 2018). The adoption of machinery use and soil fertility improvement creates a surge in the financial gains, which motivates the farmers to work more. Mental stability is, therefore, an essential tool in the decision making processes in the agricultural sectors.

Application of Behavioral insights in the agriculture sector

 Participatory engagement approach

A consultation is an imperative approach that influences decision making in the agricultural sector. The frequent meetings held during the engagement processes helps to build trust. In the agriculture field, engaging with the practitioners or other groups such as the researchers enhances social pressure, which results in the provision of peer support, social norms shaping and networking. These allow the adoption of new behaviours that accommodate the practitioner’s priorities and attitudes. The inclusion of the farmers in the decision making processes puts them in charge and may participate in the co-designing of policies and practices in the organization. Participatory engagement can only be fruitful is the entire e process is iterative and inclusive. It involves building relationships and developing an expected positive behaviour that makes it easy to come up with the right decisions (Rose et al. 2018, pp. 85). This only needs the right people to engage with to attain success. Farmers who take up the leadership roles in more prominent organizations in the agriculture sector can advise the stakeholders on essential choices.

Communication and research culture

Communication with the farmers in either informal or formal networks is essential in the decision making processes. It is important to note that this practice’s result is trust-building and enhancement of knowledge that helps in nurturing a particular behaviour. It is the responsibility of the management to make its stakeholders develop their desirable behaviour in the organization. This will put their thoughts together and reason as one body. Targeting messages to various recipients is aided by proper communication channelling within the organization. Opportunities meant for the farmers are located when appropriate behaviour is nurtured, and the proper decision is made (Dessart,  Barreiro-Hurlé and van Bavel 2019, pp. 450). Knowledge exchange is instrumental in inefficient decision-making platforms among the farmers regardless of the cadre. Besides, the provision of funds to help in the research helps build a norm in the agricultural field. Impactful research offers commendable outcomes that form the basis of staunch behaviour that targets success in the organization. This is supported by stepwise consultation of the landowners, farmers and advisors concerning the best choices to adopt in their farms. Sustainability is critical; the state of mind of optimistic farmers will highly consider engaging in research to gain new information for their departments’ development.

Application in Extension Education

Behavioural economic insights aids in the formulation of the vital policies in the organization. This is as a result of the extension education offered by the well-read fellows in that category. The policies made act as the preamble to better decision-making attitudes nurtured by both the management and the entire stakeholders (Wilson, Rhodes and Dodunski 2015, pp. 300). To add to this, evaluating these policies’ outcomes is communicated across the responsible stakeholders that propagate informed decisions to propel the organization forward. Also, an extension of education is useful in identifying uncertainties and risks that may be present in agricultural financing. Insurance, supply chain management, and marketing strategies of the farm produce. Such insights also enhance the modification of the choice environment meant to support the choices made by farmers (White and Selfa 2013, pp. 380). This is through the employment of tools such as; framing, loss aversion, social proof and endowment and decoy effects. The decisions made on the kind of technologies to adopt are made possible by identifying the right professionals to lead through the extensive education programs. Integrating normative messages into better choices offers an excellent environment for running the farm business and engages relationships. In line with this, the people are informed on the right norm to adopt for the agricultural organization’s success.


This involved indirect suggestions of the choices prospects employed in an agricultural organization during decision-making processes. It manifests as a positive reinforcement of the organization’s involved stakeholders (Kuhfuss et al. 2016, pp. 619). The behavioural change is anticipated when nudging is inculcated into the farm businesses. Engaging the management and the farmers in discussions meant to offer the right platforms for effective decision-making helps develop a unique organizational culture. For instance, the choices to abandon pesticides, the presence of regulated irrigation systems, scientific milking procedures and value chain management are imperative nudging processes that put the organization in a better place.


Uncertainties in decision-making

People living in poverty-stricken environments are likely to make ‘bad decisions’ because they can only afford cheap. Making the right choices in alleviating risks, in this case, is dependent on the risk dimension, the rules of both known and unknown probabilities in decision making and categorizing choices as either losses or profits. Focusing so much on human behaviour to target only lightweight problems in the development agencies creates biases. Other people’s decisions will not be considered because of their literacy or poverty levels (Findlater,  Satterfield and Kandlikar  2019, pp. 1760). The content in the decisions made relies on a knowledgeable management team; hence the people with farming experiences will be left out of the process. There is a need for sufficient funding and financial incentives to have the team members motivated. Lack of these aspects hence yields to ‘bad decisions’ that are made within the organization.


To this end, it is essential to conclude that behaviour stands out to be imperative in decision-making processes. In the agricultural sector discussed in the paper above, behavioural aspects that affect decision making include personal, incentives, business, social networks and feeling in charge factors. In the discussion, there is a clear illustration that cognition is vital in adapting to the dynamics that come alongside a behavioural change in making the right choices. Behavioural economics is applied in the extension of education services, significant stakeholders’ communication capabilities, and nudging. To alleviate the agricultural risks, behaviour forms the basis of sustainable decisions made in the organization.

Reference List

Alarcon, P., Wieland, B., Mateus, A.L. and Dewberry, C., 2014. Pig farmers’ perceptions, attitudes, influences and management of information in the decision-making process for disease control. Preventive veterinary medicine116(3), pp.223-242.

Barnes, A.P., Soto, I., Eory, V., Beck, B., Balafoutis, A., Sánchez, B., Vangeyte, J., Fountas, S., van der Wal, T. and Gómez-Barbero, M., 2019. Exploring the adoption of precision agricultural technologies: A cross regional study of EU farmers. Land use policy80, pp.163-174.

Dessart, F.J., Barreiro-Hurlé, J. and van Bavel, R., 2019. Behavioural factors affecting the adoption of sustainable farming practices: a policy-oriented review. European Review of Agricultural Economics46(3), pp.417-471.

Findlater, K.M., Satterfield, T. and Kandlikar, M., 2019. Farmers’ Risk‐Based Decision Making Under Pervasive Uncertainty: Cognitive Thresholds and Hazy Hedging. Risk Analysis39(8), pp.1755-1770.

Halbrendt, J., Gray, S., Chan-Halbrendt, C., Shariq, L., Tamang, B.B., Pokhara, G. and Kaski, N., 2018. Understanding Farmer’s Perception to Environmentally Sustainable Practices for Enhanced Food Security Using Fuzzy Cognitive Mapping. Sustainable food security2050.

Hermann, D., 2018. The influence of moral costs and heuristics on individual decision making: Five essays in behavioral economics (Doctoral dissertation, Georg-August-Universität Göttingen).

Kuhfuss, L., Préget, R., Thoyer, S. and Hanley, N., 2016. Nudging farmers to enrol land into agri-environmental schemes: the role of a collective bonus. European Review of Agricultural Economics43(4), pp.609-636.

Liu, T., Bruins, R.J. and Heberling, M.T., 2018. Factors influencing farmers’ adoption of best management practices: A review and synthesis. Sustainability10(2), p.432.

Mills, J., Gaskell, P., Ingram, J., Dwyer, J., Reed, M. and Short, C., 2017. Engaging farmers in environmental management through a better understanding of behaviour. Agriculture and Human Values34(2), pp.283-299.

Oliver Kasdan, D., 2018. Toward a theory of behavioral public administration. International Review of Administrative Sciences, p.0020852318801506.

Rose, D.C., Parker, C., Fodey, J., Park, C., Sutherland, W.J. and Dicks, L.V., 2018. Involving stakeholders in agricultural decision support systems: Improving user-centred designInternational Journal of Agricultural Management6(3-4), pp.80-89.

Seo, S.N., 2017. The behavioral economics of climate change: adaptation behaviors, global public goods, breakthrough technologies, and policy-making. Academic Press.

Svensson, H.M., Albæk, E., Van Dalen, A. and De Vreese, C.H., 2017. The impact of ambiguous economic news on uncertainty and consumer confidence. European Journal of communication32(2), pp.85-99.

Tey, Y.S., Li, E., Bruwer, J., Abdullah, A.M., Brindal, M., Radam, A., Ismail, M.M. and Darham, S., 2014. The relative importance of factors influencing the adoption of sustainable agricultural practices: a factor approach for Malaysian vegetable farmers. Sustainability science9(1), pp.17-29.

White, S.S. and Selfa, T., 2013. Shifting lands: Exploring Kansas farmer decision-making in an era of climate change and biofuels production. Environmental management51(2), pp.379-391.

Wilson, L., Rhodes, A.P. and Dodunski, G., 2015. Parasite management extension–challenging traditional practice through adoption of a systems approach. New Zealand veterinary journal63(6), pp.292-300.

Wunsch, G.M., 2019. Crop choices: motivational and decision-making factors that attract and retain cotton-grower employers within the Australian cotton industry (Doctoral dissertation, University of Southern Queensland).

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