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Abstract
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.