Damage Control and Increasing Returns

The indirect action of damage control inputs means the marginal productivity of these inputs depends on their effectiveness in controlling the level and size of production loss caused by the damage agent. Increasing returns to damage control inputs can occur even when control and damage functions are concave. The result implies more attention needs to be paid to the functional form selection for damage and control functions in empirical work on pest control and other types of damage control inputs. In addition, the possibility of increasing returns may undermine the general use of taxes to reduce pesticide use.