Knowledge Sharing and Learning Among Smallholders in Developing Economies: Implications, Incentives, and Reward Mechanisms

Abstract

In developing economies, smallholders use their private knowledge and exert costly effort to control their output of high quality (and low quality) crop so as to maximize profit. To improve farmers' productivity, NGOs and governments are advocating various knowledge sharing and learning platforms so that farmers can share with and learn from each other about various farming techniques. Putting altruism aside, we examine the economic implications for heterogeneous farmers to share their private farming knowledge voluntarily with other farmers under (implicit) competition. By analyzing a multi-person sequential game, we provide a plausible reason to explain why (and conditions under which) knowledge sharing can be beneficial even when each farmer's profit depends on the total output. We find that the voluntary knowledge shared level is always lower than or equal to the "first best" knowledge shared level that maximizes the farmer welfare under centralized control. This finding motivates us to develop a reward mechanism to entice farmers to increase their knowledge shared level in a decentralized system so as to maximize the farmer welfare and reduce income inequality. Upon examining different mechanisms, we establish a quota-based reward mechanism that can entice farmers to share their knowledge up to the first-best level voluntarily.