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Optimal Design Of A Voluntary Green Payment Program Under Asymmetric Information

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  • Wu, JunJie
  • Babcock, Bruce A.

Abstract

Green payment programs, where the government pays farmers directly for environmental benefits, are an alternative to the current method of achieving environmental benefits which restricts farming practices in exchange for deficiency payments. This article presents a voluntary green payment program using the principles of mechanism design under asymmetric information. Information asymmetry arises because the government knows only the distribution of farmers' production situations, rather than farm-specific information. The program is demonstrated with irrigated corn production in the Oklahoma high plains. A green payment program can reduce budget costs and pollution, while increasing the net social value of corn production.

Suggested Citation

  • Wu, JunJie & Babcock, Bruce A., 1995. "Optimal Design Of A Voluntary Green Payment Program Under Asymmetric Information," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 0(Number 2), pages 1-12, December.
  • Handle: RePEc:ags:jlaare:30774
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    File URL: http://ageconsearch.umn.edu/record/30774/files/20020316.pdf
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    References listed on IDEAS

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    1. Lewis, Tracy R. & Feenstra, Robert & Ware, Roger, 1989. "Eliminating price supports : A political economy perspective," Journal of Public Economics, Elsevier, vol. 40(2), pages 159-185, November.
    2. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
    3. Weymark, John A, 1987. "Comparative Static Properties of Optimal Nonlinear Income Taxes," Econometrica, Econometric Society, vol. 55(5), pages 1165-1185, September.
    4. Wu, JunJie & Mapp, Harry P. & Bernardo, Daniel J., 1994. "A Dynamic Analysis of the Impact of Water Quality Policies on Irrigation Investment and Crop Choice Decisions," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 26(02), pages 506-525, December.
    5. Wu, JunJie & Mapp, Harry P., Jr. & Bernardo, Daniel J., 1994. "A Dynamic Analysis Of The Impact Of Water Quality Policies On Irrigation Investment And Crop Choice Decisions," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 0(Number 2), pages 1-20, December.
    6. Partha Dasgupta & Peter Hammond & Eric Maskin, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 185-216.
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    Keywords

    Environmental Economics and Policy;

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