Contract design in agri-environmental schemes with fixed private transaction costs and countervailing incentives
AbstractThe aim of this paper is to test the relevance of considering private fixed transaction costs for contract design of Agri-Environmental Schemes, when transaction costs are negatively correlated to marginal compliance costs. In order to do so, a principal-agent model of contract design under adverse selection, including fixed private transaction costs, is developed. The model is applied to the design of payments in the Emilia Romagna region of Italy. The results show that fixed transaction costs in the range of those actually faced by farmers may significantly affect the optimal amount of environmental good to be produced by each farm type. In some cases, fixed transaction costs can even reverse the standard insight that more of a public good should be produced when the cost of its provision is lower (countervailing incentives). The results call for a higher attention to private transaction costs in the design of agri-environmental contracts.
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 InfoPaper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 44322.
Date of creation: 2008
Date of revision:
Agri-environmental schemes; principal-agent; countervailing incentives; Environmental Economics and Policy;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-11-25 (All new papers)
- NEP-CTA-2008-11-25 (Contract Theory & Applications)
- NEP-ENV-2008-11-25 (Environmental Economics)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.