Agri-Environmental Policy and Moral Hazard under Output Price and Production Uncertainty
AbstractSeveral theoretical and empirical models have been developed to examine how risk aversion affects compliance with agri-environmental schemes under asymmetric information and uncertainty. However, none has examined the case where the level of compliance is a continuous variable and producers face simultaneous monitoring, output price and production uncertainty. Treating conservation effort as a continuous variable, we show that risk aversion can mitigate the moral hazard problem in most cases. However, if conservation effort has a risk-increasing impact on production the effect of risk aversion on compliance is ambiguous.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 2008 International Congress, August 26-29, 2008, Ghent, Belgium with number 44323.
Date of creation: 2008
Date of revision:
Agri-environmental schemes; uncertainty; moral hazard; 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)
- NEP-UPT-2008-11-25 (Utility Models & Prospect Theory)
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