Determinants of Agricultural Fires: An Aggregative Games Approach

ABSTRACT The effects of deforestation caused by land fires used by farmers (especially smallholders) are twofold. From the individual (farmer) perspective, these burnings contribute to land preparation and improve fertility. On the other hand, at an aggregate level, these practices harm air and water quality, degrade the environment and as a consequence negatively impact land productivity. In this work, we present an aggregative game framework that incorporates these effects, enabling us to analyse how variations in fire costs and the number of farmers—key determinants of agricultural fires—affect the total deforested area. We also demonstrate the pervasive cross‐effect of fines imposed on a farmer (or group of farmers) on the burning decisions of others. Additionally, we prove the existence of an inverted U‐shaped relationship between fines applied for land fires and total sector production, which allows us to identify an optimal fine value that maximises total output. Finally, using data from Brazilian research institutes, we test the sign and magnitude of the impacts of these determinants on aggregate deforestation in Brazil's Legal Amazon for the period 2008–2021.