Equivalence of Input Quotas and Input Charges under Asymmetric Information in Agri-environmental Schemes
A model of adverse selection and moral hazard in agri-environmental schemes is developed based on the input quota mechanism of Moxey et al. ( Journal of Agricultural Economics, Vol. 50, (1999) pp. 187-202) and Ozanne et al. ( European Review of Agricultural Economics, Vol. 28, (2001) pp. 329-347), rather than the input charge mechanism of White ( Journal of Agricultural Economics, Vol. 53, (2002) pp. 353-360), but the variable fine of the latter rather than the fixed fine assumed by Ozanne et al. ( European Journal of Agricultural Economics, Vol. 28, (2001) pp. 329-347) is used. Incentive-compatible contracts, including the optimal probabilities of detection (and, therefore, monitoring frequencies and costs) for more and less efficient farmers, are identified. It is shown that the input charge and input quota approaches lead to identical outcomes - in terms of abatement levels, compensation payments, monitoring costs and probabilities of detection - confirming the equivalence of input quotas and input charges under asymmetric information. It is also shown that the optimal contracts are independent of the risk preferences of farmers with regard to being caught cheating. Copyright 2007 Blackwell Publishing Ltd.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 58 (2007)
Issue (Month): 2 (June)
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=0021-857X|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=0021-857X|