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Hidden action, risk aversion and variable fines in agri-environmental schemes

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  • Adam Ozanne
  • Ben White

Abstract

This note analyses the design of agri-environmental schemes for risk-averse producers whose input usage is only observable by costly monitoring. The scheme penalises producers in proportion to input use in excess of a quota. A striking result is that if the scheme is designed in such a way that producers always comply with the quota, risk aversion is not relevant in determining the level of input use. Copyright 2008 The Authors. Journal compilation 2008 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd.

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  • Adam Ozanne & Ben White, 2008. "Hidden action, risk aversion and variable fines in agri-environmental schemes ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(2), pages 203-212, June.
    • Handle: RePEc:bla:ajarec:v:52:y:2008:i:2:p:203-212
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    2. Vedel, Suzanne Elizabeth & Jacobsen, Jette Bredahl & Thorsen, Bo Jellesmark, 2015. "Contracts for afforestation and the role of monitoring for landowners’ willingness to accept," Forest Policy and Economics, Elsevier, vol. 51(C), pages 29-37.
    3. Stine Broch & Suzanne Vedel, 2012. "Using Choice Experiments to Investigate the Policy Relevance of Heterogeneity in Farmer Agri-Environmental Contract Preferences," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(4), pages 561-581, April.
    4. Ben White & Rohan Sadler, 2012. "Optimal conservation investment for a biodiversity‐rich agricultural landscape," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(1), pages 1-21, January.
    5. Maria Alló & Maria L. Loureiro & Eva Iglesias, 2015. "Farmers' Preferences and Social Capital Regarding Agri‐environmental Schemes to Protect Birds," Journal of Agricultural Economics, Wiley Blackwell, vol. 66(3), pages 672-689, September.
    6. Sauer, J. & Walsh, J. & Zilberman, D., 2014. "Agri-Environmental Policy Effects at Producer Level – Identification and Measurement," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 49, March.
    7. Lapierre, Margaux & Le Velly, Gwenolé & Bougherara, Douadia & Préget, Raphaële & Sauquet, Alexandre, 2023. "Designing agri-environmental schemes to cope with uncertainty," Ecological Economics, Elsevier, vol. 203(C).
    8. Sophie Thoyer & Sandra Saïd, 2007. "Mesures agri-environnementales : quels mécanismes d’allocation?," Studies and Syntheses 07-01, LAMETA, Universtiy of Montpellier, revised Jan 2007.
    9. Alló, Maria & Igleasias, Eva & Loureiro, Maria L., 2013. "Farmers’ preferences and social capital towards agri-environmental schemes for protecting birds," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150620, Agricultural and Applied Economics Association.
    10. Sauer, Johannes & Walsh, John, 2011. "ESS versus NVZ – The Cost-Effectiveness of Command-and-Control versus Agreement Based Policy Instruments," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108963, Agricultural Economics Society.
    11. Sauer, Johannes & Walsh, John & Zilberman, David, 2012. "Behavioural Change through Agri-Environmental Policies ? – A Distance Function based Matching Approach," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 134783, Agricultural Economics Society.
    12. Matteo Olivieri & Maria Andreoli & Daniele Vergamini & Fabio Bartolini, 2021. "Innovative Contract Solutions for the Provision of Agri-Environmental Climatic Public Goods: A Literature Review," Sustainability, MDPI, vol. 13(12), pages 1-22, June.
    13. Wieck, Christine & Annen, Dominic N., 2012. "Participation, compliance and synergies at the farm level between the single payments scheme and farm certification labels," Discussion Papers 122123, University of Bonn, Institute for Food and Resource Economics.
    14. Cho, Wonjoo & Blandford, David, 2015. "Bilateral information asymmetry and irreversible practice adoption through agri-environmental policy: an application to peat land retirement in Norway," 89th Annual Conference, April 13-15, 2015, Warwick University, Coventry, UK 204212, Agricultural Economics Society.
    15. Sauer, Johannes & Walsh, John & Zilberman, David, 2012. "Producer Behaviour and Agri-Environmental Policies: A Directional Distance based Matching Approach," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124877, Agricultural and Applied Economics Association.

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