Time inconsistent resource conservation contracts
Are commonly observed resource conservation contracts efficient? In this paper we construct a model that embodies common characteristics of resource contracts. Using this model, we analyze a large class of real-world resource contracts and find them to be economically inefficient. This inefficiency stems from a time inconsistency inherent in these contracts. There are two possible ways to overcome this time inconsistency. The first is to employ a sufficiently large penalty for early termination of the contract. The second and possibly easier method is to offer an upward sloping conservation payment schedule so far overlooked by resource contracts. Under this payment schedule, the agent's ex-ante and ex-post contract choices coincide, social externalities are fully internalized, and the contractual outcome is economically efficient even in the absence of a penalty for early termination.
(This abstract was borrowed from another version of this item.)
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.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Kenneth M. Chomitz & Franck Lecocq, 2003.
"Temporary sequestration credits : an instrument for carbon bears,"
Policy Research Working Paper Series
3181, The World Bank.
- Kenneth M. Chomitz & Franck Lecocq, 2004. "Temporary sequestration credits: an instrument for carbon bears," Climate Policy, Taylor & Francis Journals, vol. 4(1), pages 65-74, March.
- Feng, Hongli & Zhao, Jinhua & Kling, Catherine L., 2002. "Time Path and Implementation of Carbon Sequestration (The)," Staff General Research Papers 5068, Iowa State University, Department of Economics.
- Antle, John & Capalbo, Susan & Mooney, Sian & Elliott, Edward & Paustian, Keith, 2003. "Spatial heterogeneity, contract design, and the efficiency of carbon sequestration policies for agriculture," Journal of Environmental Economics and Management, Elsevier, vol. 46(2), pages 231-250, September.
When requesting a correction, please mention this item's handle: RePEc:eee:jeeman:v:52:y:2006:i:1:p:454-468. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.