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Incentive Contracts for Natura 2000 Implementation: A Mixed Model of Adverse Selection and Moral Hazard

Author

Listed:
  • Signe Anthon
  • Serge Garcia

    (Laboratoire d'Economie Forestière, INRA - AgroParisTech)

  • Anne Stenger

    (Laboratoire d'Economie Forestière, INRA - AgroParisTech)

Abstract

The implementation of nature conservation policy in the EU is often based on contracts between public authorities and landowners. We model these contracts in the presence of adverse selection and moral hazard when the outcome is uncertain. The results show that agents, who have high probability to reach a higher level of conservation, should be offered a contract where transfers depend on the final outcome with a bonus for a high state. When conservation measures are correlated with forest management, we show that the contractual measures involve distorded tranfers. Finally, we analyze the payment mechanisms used in France and Denmark and show that these mechanisms result in overcompensation and underperformance since they do not take the problem of moral hazard and natural variability into account.

Suggested Citation

  • Signe Anthon & Serge Garcia & Anne Stenger, 2006. "Incentive Contracts for Natura 2000 Implementation: A Mixed Model of Adverse Selection and Moral Hazard," Working Papers - Cahiers du LEF 2006-06, Laboratoire d'Economie Forestiere, AgroParisTech-INRA.
    • Handle: RePEc:lef:wpaper:2006-06
    as

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    File URL: https://www.nancy.inra.fr/lef/content/download/2914/28879/version/1/file/doc_LEF_n06.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Francesco Testa & Natalia M. Gusmerotti & D. Amirante & Marco Frey, 2012. "The role of negotiating tools in the environmental policy mix instruments: determinants and effects of Environmental Agreement," Working Papers 201202, Scuola Superiore Sant'Anna of Pisa, Istituto di Management.

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    More about this item

    Keywords

    Natura 2000; Forest; Contracts; Mixed model; Adverse selection; Moral hazard.;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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