Designing species-specific conservation contracts in a heterogeneous landscape with unobservable conservation costs and benefits

Paying for species-specific conservation requires to encourage landowners to provide both habitat suitability in order to establish conservation networks, and species protection in order to maintain its presence. We investigate the possibility to define differentiated contracts for species-specific conservation when both conservation costs and benefits are unobservable and heterogeneous. We develop a common-value principal-agent model, in which the principal’s preferences for both types of conservation benefits is explicitly taken into account. The level of effective protection benefits provided by an agent is captured by her level of unobservable protection costs. We analytically demonstrate the possibility to define differentiated conservation payments despite a non-responsiveness situation, known to usually lead to bunching equilibria. Results of numerical landscape-scale simulations show that contracts derived from a common-value model can perform better than those derived from a classic adverse selection model. We find differentiated contracts, which are closer to first-best ones and show interesting cost-effectiveness performances.