CAP direct payments and distributional conflicts within corporate farms in the New Member States: a game theory approach focusing on rented land

This paper aims to investigate whether distributional issues within corporate farms in the New Member States will be exacerbated by the introduction of the Common Agricultural Policy (CAP) direct payments. The paper focuses on the specific impact of the direct payments on the rent negotiations between corporate farms and private landowners. If the latter are not satisfied with the level of rent they receive, they have the option to end their rental contract and withdraw their land from the farm. In this paper, game theory is used to model the negotiations between a corporate farm’s manager and a representative landowner. The model suggests that the CAP direct payments might induce more rent renegotiations, and that the latter will be successful and thus not followed by withdrawals. Results from a survey of thirty-three landowners in Slovakia and the Czech Republic corroborate these findings. They indicate a potential change in landowners’ behaviour induced by the introduction of the CAP direct payments, namely that more landowners intend to renegotiate their rent level in the next five years. All this leads to the conclusion that the CAP support will not result in the quick disappearance of corporate farms