IDEAS home Printed from
   My bibliography  Save this paper

Agri-environment Policy Design With Hidden Information and Hidden Action: Input Quotas vs Input Charges


  • Ozanne, Adam
  • White, Benedict


Moxey, White and Ozanne (1999) have shown how transfer payments coupled with input quotas can be used to design optimal truth-telling mechanisms for voluntary agri-environmental schemes under hidden information about compliance costs. Ozanne, Hogan and Colman (2001) adapted the Moxey et al. model to analyze hidden action in such schemes, analyzing the relationships between input abatement, the cost of monitoring compliance and farmers’ risk preferences. White (2002) extended the Moxey et al. model to analyze the design of contracts under both hidden action and hidden information, but used an input charge/transfer payment approach rather than the original input quota/transfer payment one. In addition, he assumed that farmers caught cheating face a variable fine, related to the amount of input they apply in excess of the amount agreed in the contract, rather than a fixed fine as assumed by Ozanne et al. White argues that his results show that an input charge/transfer payment policy is more efficient than a quota when the regulator cannot observe compliance costs of individual farmers. This paper integrates the previous work, developing a model of both hidden action and hidden information in agri-environmental schemes based on the input quota/transfer payment approach of Moxey et al. (1999) and Ozanne et al. (2001), rather than the input charge/transfer payment approach of White (2002), but the variable fine of the latter rather than the fixed fine assumed by Ozanne et al. This integrated model shows that, contrary to White (2002), the input quota and input charges approaches lead to identical outcomes in terms of abatement levels, compensation payments, monitoring costs, probabilities and social welfare.

Suggested Citation

  • Ozanne, Adam & White, Benedict, 2003. "Agri-environment Policy Design With Hidden Information and Hidden Action: Input Quotas vs Input Charges," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 58196, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare03:58196

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Andrew Moxey & Ben White & Adam Ozanne, 1999. "Efficient Contract Design for Agri-Environment Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 187-202.
    2. Rob Fraser, 2002. "Moral Hazard and Risk Management in Agri-environmental Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(3), pages 475-487.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Ozanne, Adam & White, Benedict, 2008. "Hidden action, risk aversion and variable fines in agri-environmental schemes," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(2), June.
    2. Stefani, Gianluca & Giudicissi, Eufrasia, 2011. "Cross Compliance: what about compliance?," 122nd Seminar, February 17-18, 2011, Ancona, Italy 99597, European Association of Agricultural Economists.
    3. Peter Bardsley & Ingrid Burfurd, 2008. "Contract Design for Biodiversity Procurement," Department of Economics - Working Papers Series 1031, The University of Melbourne.
    4. Bazzani, Guido Maria & Viaggi, Davide, 2004. "Improving the design of agri-environmental policies: a case study in Italy," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 5(2), August.

    More about this item


    Environmental Economics and Policy;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aare03:58196. 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: (AgEcon Search). General contact details of provider: .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.