Does tendering conservation contracts with performance payments generate additional benefits?
AbstractPolicy makers aiming to get private landholders to supply non-marketed environmental services may need to provide efficient economic incentives. Two ideas have been explored to achieve this: linking contract payments to environmental outcomes and submitting the contracts to competitive tender. This paper investigates whether there are any gains to be had by combining the potential benefits of both approaches. Landholders’ risk aversion to only partially controlled outcomes may offset incentive effects if the fall in participation outweighs any increases in individual effort. Controlled lab experiments were designed on the basis of a theoretical model and were run in two countries, with varying rates of payments linked to environmental outcomes. Results suggest that it can be counterproductive in terms of expected environmental outcomes to combine tenders with incentive payments, especially when the target population is known to be risk-averse.
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Bibliographic InfoPaper provided by University of Western Australia, School of Agricultural and Resource Economics in its series Working Papers with number 100883.
Date of creation: 18 Feb 2011
Date of revision:
Conservation tenders; auctions; incentive contracts; agricultural policy; environmental policy; market-based instruments; experimental economics; Environmental Economics and Policy; Land Economics/Use; C92; D44; D82; D86; H57; Q24; Q28;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
- Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
- Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
This paper has been announced in the following NEP Reports:
- NEP-AGR-2011-03-19 (Agricultural Economics)
- NEP-ALL-2011-03-19 (All new papers)
- NEP-ENV-2011-03-19 (Environmental Economics)
- NEP-EXP-2011-03-19 (Experimental Economics)
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