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Combating moral hazard in agri-environmental schemes: a multiple-agent approach

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  • Rob Hart
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Abstract

We introduce uncertainty about farmer characteristics into the moral hazard problem facing a regulator offering agri-environmental contracts. Our model allows for a continuum of farmer compliance costs. For reasonable parameter values the model predicts high levels of cheating and intensive monitoring, contrary to the evidence. We therefore add variation in farmers' propensity to cheat, the regulator's assessment of which has a decisive effect on policy: if farmers are overwhelmingly honest then the regulator reduces monitoring and accepts that some dishonest farmers will escape undetected. Paradoxically, the total number of cheats may increase following an increase in the number of honest farmers. Copyright 2005, Oxford University Press.

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Bibliographic Info

Article provided by Foundation for the European Review of Agricultural Economics in its journal European Review of Agricultural Economics.

Volume (Year): 32 (2005)
Issue (Month): 1 (March)
Pages: 75-91

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Handle: RePEc:oup:erevae:v:32:y:2005:i:1:p:75-91

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Cited by:
  1. Fraser, Rob W., 2011. "Moral Hazard, Targeting and Contract Duration in Agri-Environmental Policy," 85th Annual Conference, April 18-20, 2011, Warwick University, Coventry, UK 108795, Agricultural Economics Society.
  2. 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.
  3. Yano, Yuki & Blandford, David, 2008. "Agri-Environmental Policy and Moral Hazard under Output Price and Production Uncertainty," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44323, European Association of Agricultural Economists.
  4. Yano, Yuki & Blandford, David, 2008. "Use of Penalties and Rewards in Agri-Environmental Policy," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36873, Agricultural Economics Society.
  5. Latacz-Lohmann, Uwe & Schilizzi, Steven & Breustedt, Gunnar, 2011. "Auctioning Outcome-Based Conservation Contracts," 51st Annual Conference, Halle, Germany, September 28-30, 2011 114523, German Association of Agricultural Economists (GEWISOLA).
  6. 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.
  7. Vedel, Suzanne E. & Lund, Dorthe H. & Jacobsen, Jette B. & Helles, Finn, 2006. "Grants for advisory services in the private Danish forestry sector - A principal-agent approach," Journal of Forest Economics, Elsevier, vol. 12(3), pages 185-199, December.
  8. Romstad, Eirik & Alfnes, Frode, 2011. "Bidding behavior in environmental contract auctions with incomplete monitoring," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 115985, European Association of Agricultural Economists.
  9. Kentaro Kawasaki & Takeshi Fujie & Kentaro Koito & Norikazu Inoue & Hiroki Sasaki, 2012. "Conservation Auctions and Compliance: Theory and Evidence from Laboratory Experiments," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 52(2), pages 157-179, June.
  10. Stine Broch & Suzanne Vedel, 2012. "Using Choice Experiments to Investigate the Policy Relevance of Heterogeneity in Farmer Agri-Environmental Contract Preferences," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 51(4), pages 561-581, April.
  11. Vedel, Suzanne Elizabeth & Thorsen, Bo Jellesmark & Jacobsen, Jette Bredahl, 2009. "First-movers, non-movers, and social gains from subsidising entry in markets for nature-based recreational goods," Ecological Economics, Elsevier, vol. 68(8-9), pages 2363-2371, June.
  12. Bartolini, Fabio & Gallerani, Vittorio & Raggi, Meri & Viaggi, Davide, 2008. "Modelling The Effectiveness Of Cross-Compliance Under Asymmetric Information," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6670, European Association of Agricultural Economists.
  13. Thilo W. Glebe, 2006. "Cost-effectiveness of agri-environmental payment programs," Discussion Papers 032006, Technische Universität München, Environmental Economics and Agricultural Policy Group, revised 2008.
  14. Schilizzi, Steven & Breustedt, Gunnar & Latacz-Lohmann, Uwe, 2011. "Does tendering conservation contracts with performance payments generate additional benefits?," Working Papers 100883, University of Western Australia, School of Agricultural and Resource Economics.
  15. Gorddard, Russell J. & Whitten, Stuart M. & Reeson, Andrew, 2008. "When should biodiversity tenders contract on outcomes?," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 5979, Australian Agricultural and Resource Economics Society.
  16. Bachev, Hrabrin, 2013. "Natural resources conservation management and strategies in agriculture," MPRA Paper 46368, University Library of Munich, Germany.
  17. Signe Anthon & Serge Garcia & Anne Stenger, 2010. "Incentive Contracts for Natura 2000 Implementation in Forest Areas," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 46(3), pages 281-302, July.
  18. Bachev, Hrabrin & Yovchevska, Plamena & Mitova, Dilyana & Toteva, Desislava & Mitov, Anton, 2013. "Еко-Управление В Българското Селското Стопанство
    [Environmental Management in Bulgarian Agriculture]
    ," MPRA Paper 52202, University Library of Munich, Germany.

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