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European Association of Agricultural Economists >
2008 International Congress, August 26-29, 2008, Ghent, Belgium >
Please use this identifier to cite or link to this item:
http://purl.umn.edu/44320
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| Title: | Green payment programs, asymmetric information and the role of fixed costs |
| Authors: | Arguedas, C.
Meijerink, Gerdien W.
van Soest, Daan P. |
| Keywords: | Asymmetric information
environmental
benefits
mechanism design |
| Issue Date: | 2008 |
| Abstract: | Many conservation programs offer financial
compensation to farmers in exchange for socially desired
services, such as soil conservation or biodiversity protection.
Realization of the conservation objective at minimum cost
requires payments to just cover the extra costs incurred by
each individual (type of) farmer. In the presence of
information asymmetries regarding costs, incentive-compatible
contracts can be designed to mitigate excess compensation, but
these typically only provide partial improvement because of
several distortions. We argue that these distortions are
inevitable only if all conservation costs are variable in nature.
If there are fixed costs too, we find that the least-cost solution
can be incentive compatible. We identify the exact conditions
under which these maximum savings can be obtained and
conclude that, given the relevance of fixed costs in
conservation services provision, incentive—compatible
contracts deserve a second look. |
| URI: | http://purl.umn.edu/44320 |
| Institution/Association: | European Association of Agricultural Economists>2008 International Congress, August 26-29, 2008, Ghent, Belgium |
| Total Pages: | 10 |
| Collections: | 2008 International Congress, August 26-29, 2008, Ghent, Belgium
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