Livestock Disease Indemnity Design under Common Uncertainty: A Multi-agent Problem

For most of the contagious livestock diseases, the disease prevalence rates among farms are interrelated. This article develops a principal multi-agent model to study the optimal livestock indemnity design in face of common uncertainties. Our results indicate that the indemnity scheme taking multiple farms into account is most applicable in two cases: 1) the farmers' disease prevalence rates are highly correlated and 2) the effectiveness of biosecurity effort proves to be low.