Incentive Contract and Weather Risk
AbstractWe study contracts designed to remunerate a farmer for the production of an ecosystem service with the payment dependent on the results of the farmer’s actions and on weather conditions. Two contracts are proposed: the first takes into account both the results of the farmer’s actions and a weather variable that reflects the actual atmospheric conditions during the life of the contract; the second bases the payment on the results alone incorporating only the average effect of weather. Social welfare is optimal when both the results and the specific atmospheric conditions are taken into account; however, this type of contract may be less acceptable to the farmer due to his perception of the level of risk involved. Copyright Springer Science+Business Media, Inc. 2006
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.
Volume (Year): 35 (2006)
Issue (Month): 2 (October)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100263
ecosystem service; incentive contract; moral hazard; risk; weather; D8; Q2;
Find related papers by JEL classification:
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Grossman, Sanford J & Hart, Oliver D, 1983.
"An Analysis of the Principal-Agent Problem,"
Econometric Society, vol. 51(1), pages 7-45, January.
- Sanford J Grossman & Oliver D Hart, 2001. "An Analysis of the Principal-Agent Problem," Levine's Working Paper Archive 391749000000000339, David K. Levine.
- Sanford Grossman & Oliver Hart, . "An Analysis of the Principal-Agent Problem," Rodney L. White Center for Financial Research Working Papers 15-80, Wharton School Rodney L. White Center for Financial Research.
- Jussi Lankoski & Markku Ollikainen, 2003. "Agri-environmental externalities: a framework for designing targeted policies," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 30(1), pages 51-75, March.
- Joseph C. Cooper, 2003.
"A Joint Framework for Analysis of Agri-Environmental Payment Programs,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 85(4), pages 976-987.
- Cooper, Joseph C., 2001. "A Joint Framework for Analysis of Agri-Environmental Payment Programs," 2001 Annual meeting, August 5-8, Chicago, IL 20493, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Peter Goldsmith & Rishi Basak, 2001. "Incentive Contracts and Environmental Performance Indicators," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 20(4), pages 259-279, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.