THE CONSERVATION RESERVE PROGRAM AS A LEAST-COST LAND RETIREMENT MECHANISM

Mechanism design theory is used to characterize the properties of a le ast-cost CRP. If marginal land rents decrease with acres farmed then a least-cost CRP is a set of nonlinear price schedules. If marginal lan d rents are independent of acres farmed then an offer system constitut es a least-cost CRP. The least-cost offer system gives a useful estima te of the upper bound of a least-cost CRP. Empirical results suggest t hat a 34-million-acre CRP should have cost no more than $1 billion per year.