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Should conservation contracts include incentive payments and also be put up for tender?

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  • Schilizzi, Steven
  • Latacz-Lohmann, Uwe

Abstract

In order to maximize efficiency, should conversation contracts include incentive payments and also be put up for tender? This work uses laboratory experiments to investigate this question. We find that there exists an optimal share of performance payment which yields maximum total stewardship effort and expected environmental outcome. While cost-effectiveness is maximized with the totality of payments linked to outcomes, it comes at the cost of reduced participation. Tendering such contracts yields additional benefits in terms of effort extraction and cost-effectiveness, but these benefits rapidly decline with the share of performance payment. Combining high shares of performance payments with tendering runs the risk of falling far short of the environmental target.

Suggested Citation

  • Schilizzi, Steven & Latacz-Lohmann, Uwe, 2014. "Should conservation contracts include incentive payments and also be put up for tender?," 2014 Conference (58th), February 4-7, 2014, Port Macquarie, Australia 165873, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare14:165873
    DOI: 10.22004/ag.econ.165873
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    References listed on IDEAS

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    1. Costello, Christopher & Polasky, Stephen, 2004. "Dynamic reserve site selection," Resource and Energy Economics, Elsevier, vol. 26(2), pages 157-174, June.
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    Agricultural and Food Policy; International Relations/Trade;

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