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Auctioning Outcome-Based Conservation Contracts

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  • Latacz-Lohmann, Uwe
  • Schilizzi, Steven
  • Breustedt, Gunnar
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    Abstract

    This paper explores two ideas to enhance the performance of agri-environmental contracting schemes: linking contract payments to environmental outcomes and putting the contracts up for tender. This paper investigates whether there are any gains to be had by combining the benefits of both approaches. Controlled lab experiments were run in two countries, systematically varying the rate at which payments are linked to environmental outcomes. This paper clarifies the conditions under which the benefits from combining tenders with incentive payments outweigh the costs.

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    File URL: http://purl.umn.edu/114523
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    Bibliographic Info

    Paper provided by German Association of Agricultural Economists (GEWISOLA) in its series 51st Annual Conference, Halle, Germany, September 28-30, 2011 with number 114523.

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    Date of creation: 2011
    Date of revision:
    Handle: RePEc:ags:gewi11:114523

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    Related research

    Keywords: Conservation tenders; auctions; incentive contracts; agricultural policy; environmental policy; market-based instruments; experimental economics; Auktionen; Ausschreibungsverfahren; Agrar-Umweltverträge; Agrar-Umweltpolitik; Anreizverträge; experimentelle Ökonomie; Agribusiness; Agricultural and Food Policy; Agricultural Finance; Demand and Price Analysis; Political Economy;

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    References

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    1. 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.
    2. Stefan Hajkowicz & Andrew Higgins & Kristen Williams & Daniel P. Faith & Michael Burton, 2007. "Optimisation and the selection of conservation contracts," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 51(1), pages 39-56, 03.
    3. Steven Schilizzi & Uwe Latacz-Lohmann, 2007. "Assessing the Performance of Conservation Auctions: An Experimental Study," Land Economics, University of Wisconsin Press, vol. 83(4), pages 497-515.
    4. 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.
    5. Andrew Moxey & Ben White & Adam Ozanne, 1999. "Efficient Contract Design for Agri-Environment Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 187-202.
    6. Jean-Jacques Laffont & Jean Tirole, 1985. "The Dynamics of Incentive Contracts," Working papers 397, Massachusetts Institute of Technology (MIT), Department of Economics.
    7. Branco, Fernando, 1995. "Auctioning Incentive Contracts: The Common Cost, Independent Types Case," Journal of Regulatory Economics, Springer, vol. 7(3), pages 277-92, May.
    8. Schilizzi, Steven & Latacz-Lohmann, Uwe, 2007. "Assessing the performance of conservation auctions: an experimental study," 2007 Conference (51st), February 13-16, 2007, Queenstown, New Zealand 10436, Australian Agricultural and Resource Economics Society.
    9. A. P. Moxey & B. White & R. A. Sanderson & S. P. Rushton, 1995. "An Approach To Linking An Ecological Vegetation Model To An Agricultural Economic Model," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(3), pages 381-397.
    10. Rob Fraser, 2002. "Moral Hazard and Risk Management in Agri-environmental Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(3), pages 475-487.
    11. 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.
    12. Jean-Jaques Laffont & Jean Tirole, 1985. "Auctioning Incentive Contracts," Working papers 403, Massachusetts Institute of Technology (MIT), Department of Economics.
    13. 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.
    14. Ching-jen Sun, 2011. "A note on the dynamics of incentive contracts," International Journal of Game Theory, Springer, vol. 40(3), pages 645-653, August.
    15. Ferraro, Paul J., 2008. "Asymmetric information and contract design for payments for environmental services," Ecological Economics, Elsevier, vol. 65(4), pages 810-821, May.
    16. Costello, Christopher & Polasky, Stephen, 2004. "Dynamic reserve site selection," Resource and Energy Economics, Elsevier, vol. 26(2), pages 157-174, June.
    17. 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, January.
    18. Connor, Jeffery D. & Ward, John R. & Bryan, Brett, 2008. "Exploring the cost effectiveness of land conservation auctions and payment policies," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(3), September.
    19. 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.
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    Cited by:
    1. Musshoff, Oliver & Hirschauer, Norbert, 2012. "Planspiele als experimentelle Methode der Politikfolgenabschätzung: Das Beispiel der Stickstoffextensivierung," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 137164, German Association of Agricultural Economists (GEWISOLA).

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