This paper examines the incentive design for environment-friendly dairy farming. Despite many policy efforts, many dairy farmers tend to buy feeds instead of growing pasture in their own fields. Their decision-making mechanism is re-examined, and what programs and subsidies could induce them to increase pasture production is designed in this paper. In addition, there are not enough incentives for farmers to build manure-composting facilities in the current government programs. This paper proposes how much amount of subsidies is desirable to induce farmers to handle manure properly.
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