Shepherd's Dilemma

Recent outbreaks of Rift Valley Fever in sheep have led to boycotts of African livestock by Middle Eastern importers. To normalize trade, attempts have been made to apply new livestock forecasting and monitoring technologies. In this process, producers have exhibited a resistance in revealing livestock health information, a resistance that could jeopardize the information system and lead to further boycotts. We investigate the incentives governing this problem and model the most fundamental contract issues, those concerning reputation and credibility. Equilibrium contracts require that the buyer compensate the producer for private information to address the shepherd's dilemma of concealing livestock information (and facing continued boycotts) or revealing the information and being blacklisted.