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Endogenous Information Structures in Conservation Contracting

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  • Goeschl, Timo
  • Lin, Tun

Abstract

Landowners are commonly not only better informed about their private cost of conservation than conservation agencies, but also frequently in a position to spend resources on improving their knowledge about contract-relevant parameters before signing a contract on offer. We extend and generalize the literature on conservation contracting by endogenizing the information structure in a setting where the conservation agency is both asymmetrically informed about the efficiency of the landowner and unable to observe whether the landowner collects information after being offered the contract and before signing it. In this setting, we study the optimal contract the conservation agency should offer to the landowner conditional on the cost of information collection. This contract needs to balance moral hazard and adverse selection problems since by encouraging a landowner to collect information, the conservation agency simultaneously increases the landowner's incentive to misreport his 'type'. We term this the 'information rent effect'. Due to its presence, the terms of conservation contracts have to be significantly altered relative to a contract offered based on exogenous information structure or a contract based purely on information collection.

Suggested Citation

  • Goeschl, Timo & Lin, Tun, 2004. "Endogenous Information Structures in Conservation Contracting," Staff Papers 12666, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    • Handle: RePEc:ags:wisagr:12666
    DOI: 10.22004/ag.econ.12666
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    References listed on IDEAS

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    Cited by:

    1. Luca Di Corato, 2006. "Mechanism Design for Biodiversity Conservation in Developing Countries," "Marco Fanno" Working Papers 0034, Dipartimento di Scienze Economiche "Marco Fanno".

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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • Q22 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Fishery

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