There are many options for controlling the spread of animal diseases. Some diseases have been treated as public sector problems and many nations have tried to control disease spread by purchasing sick animals from farmers. Government agencies have purchased breeding stock that might transmit diseases. Government agencies have purchased animals that might otherwise have gone to the slaughterhouse, thereby keeping pathogens out of the food supply. Our hypothesis is that when it is not immediately obvious to farmers or private sector buyers which animals carry or transmit diseases, a government indemnity program's success is not assured. Instead, disease control depends on farmers' ability to respond to the relative prices they face. We examine the incentives created by prices (indemnity payment levels) government agencies choose. The scrapie indemnity eradication program in the United States (1952-1992) provides a natural laboratory for measuring the responsiveness to government-set prices. We show that government-set prices played a major role in determining the program's outcome: the supply of infected animals was price elastic. We argue that short-run movements in relative prices and the number of infected animals offer a practical method for assessing program effectiveness. © 2000 Elsevier Science B. V. All rights reserved.