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When should biodiversity tenders contract on outcomes?

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Author Info

  • Gorddard, Russell J.
  • Whitten, Stuart M.
  • Reeson, Andrew

Abstract

Making conservation program payments conditional on outcomes offers potential efficiency and innovation improvements over input based contracts. This paper explores the trade-offs involved in choosing the payment criteria for biodiversity tenders. A model where the budget for a conservation tender can be allocated to input, outcome or mixed payments is used to explore the impacts of hidden actions, adverse selection, and landholder risk aversion on the optimal policy design. We discuss the implications of these results for the design of the ‘Nest Egg’ tender. This tender is targeting habitat and breeding of ground-nesting birds in the New South Wales Murray Catchment.

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Bibliographic Info

Paper provided by Australian Agricultural and Resource Economics Society in its series 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia with number 5979.

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Date of creation: 2008
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Handle: RePEc:ags:aare08:5979

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Related research

Keywords: OUTCOME CONTRACTS; RISK AVERSION; BIODIVERSITY TENDERS; CONTRACT DESIGN; NEST EGG; Environmental Economics and Policy;

This paper has been announced in the following NEP Reports:

References

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  1. Uwe Latacz-Lohmann & Carel Van der Hamsvoort, 1997. "Auctioning Conservation Contracts: A Theoretical Analysis and an Application," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 407-418.
  2. Fraser, Rob W., 2002. "Moral Hazard and Risk Management in Agri-Environmental Policy," 2002 Conference (46th), February 13-15, 2002, Canberra 125086, Australian Agricultural and Resource Economics Society.
  3. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
  4. Rob Hart, 2005. "Combating moral hazard in agri-environmental schemes: a multiple-agent approach," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(1), pages 75-91, March.
  5. R. Preston McAfee & John McMillan, 1986. "Bidding for Contracts: A Principal-Agent Analysis," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 326-338, Autumn.
  6. Adam Ozanne & Ben White, 2007. "Equivalence of Input Quotas and Input Charges under Asymmetric Information in Agri-environmental Schemes," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(2), pages 260-268, 06.
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Citations

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Cited by:
  1. Bardsley, Peter & Burfurd, Ingrid, 2009. "Contract Design for Biodiversity Procurement," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 48047, Australian Agricultural and Resource Economics Society.
  2. Zabel, Astrid & Roe, Brian, 2009. "Optimal design of pro-conservation incentives," Ecological Economics, Elsevier, vol. 69(1), pages 126-134, November.
  3. 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).
  4. 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.
  5. Zabel, Astrid & Bostedt, Goran & Engel, Stefanie, 2011. "Outcomes and Determinants of Success of a Performance Payment Scheme for Carnivore Conservation," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 115973, European Association of Agricultural Economists.

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