The voluntary check-off program for pears in Korea has been in operation since 2004. However, its operation has not reached its full capacity since it collects check-off indirectly from cooperatives, not directly from individual farmers. To enhance the collection and operational efficiency, a mandatory check-off program has been proposed. However, if an enforcement mechanism to deter farmers from free-riding and a proper level of willingness-to-pay to induce farmers to pay are not devised, the mandatory program will fail.
To design an efficient collection mechanism, willingness-to-pay for the check-off has been surveyed first. In the survey, farmers are asked to reveal their preferences on paying unit check-off ‘per pear-wrapper’ at production stage or paying ‘per shipment box’ at shipment stage. Assuming that the farmers reveal their willingness-to-pay truthfully, the maximum total check-off that can be collected through the ‘per box’ program was KRW518million and the unit check-off was estimated to be KRW50/box with a participation rate of 46%, whereas they were estimated as KRW295million, KRW0.5/wrapper and 30% respectively when collected through the ‘per wrapper’ program. However, it was found that farmers have incentives to lie about their true willingness-to-pay and to free-ride. This cheating behaviors make the above maximum collection infeasible.
To consider the cheating behaviors of the farmers and to design an incentives and participation compatible check-off collection mechanism, the mechanism design in game theory has been used. According to the mechanism designed, the optimal unit check-off levels are KRW9.79/box for ‘per box’ design and KRW0.28/wrapper for ‘per wrapper’ design. Thus, the total check-offs are estimated to be KRW222million with participation rate of 73% for ‘per box’ program and KRW365million with participation rate of 75% for ‘per wrapper’ program. Thus, ‘per wrapper’ mechanism is found to be more appropriate with bigger total check-off and higher participation rate.