Optimal Afforestation Contracts with Asymmetric Information on Private Environmental Benefits

We investigate the problem of subsidising afforestation when private information exists with respect to the level of private utility derived from the project. We develop a simple model that allows for an intelligent design of contracts when information is asymmetric. The model involves the Principal and two groups of agents (landowners): a ‘green’ group deriving high private utility from the projects and a ‘conventional’ group deriving lower utility. Afforestation projects may be produced in different environmental quality, and we distinguish between two cases, a high quality and a low quality project. We find that the optimal set of contracts under asymmetric information involves two different contracts. One in which green landowners are somewhat overcompensated for projects of high quality, and one where conventional landowners are offered contracts including lower quality projects, compared to the symmetric case, but with compensation equal to his indifference payment. It is the ability to reduce quality requirements along with subsidies offered that allows for revelation of the private information. Finally, we discus how the results obtained may be used in the implementation of incentive schemes.

[1]  Anil Markandya,et al.  Empirical Analysis of National Income and So2 Emissions In Selected European Countries , 2004 .

[2]  Lori S. Bennear,et al.  The Effects of Environmental Regulation on Technology Diffusion: The Case of Chlorine Manufacturing , 2003 .

[3]  Francesco Pigliaru,et al.  How Fast are the Tourism Countries Growing? The Cross-Country Evidence , 2003 .

[4]  J. Stiglitz,et al.  Credit Rationing in Markets with Imperfect Information , 1981 .

[5]  Michele Moretto,et al.  Investment Size and Firm's Value Under Profit Sharing Regulation , 2003 .

[6]  Marzio Galeotti,et al.  Weather Impacts on Natural, Social and Economic Systems (Wise) Part Ii: Individual Perception of Climate Extremes in Italy , 2004 .

[7]  P. Nunes,et al.  Monetary Value Assessment of Clam Fishing Management Practices in the Venice Lagoon: Results from a Stated Choice Exercise , 2003 .

[8]  Linda Chaib,et al.  Immigration and Local Urban Participatory Democracy: A Boston-Paris Comparison , 2004 .

[9]  Ekko C. van Ierland,et al.  Stability of Climate Coalitions in a Cartel Formation Game , 2003 .

[10]  Trond Bjorndal,et al.  Output Substitution in Multi-Species Trawl Fisheries: Implications for Quota Setting , 2004 .

[11]  Alberto Petrucci,et al.  Taxing Land Rent in an Open Economy , 2003 .

[12]  Marian L. Weber,et al.  Assessing the Effectiveness of Tradable Landuse Rights for Biodiversity Conservation: An Application to Canada's Boreal Mixedwood Forest , 2004 .

[13]  Florian Englmaier,et al.  The Chopstick Auction: A Study of the Exposure Problem in Multi-Unit Auctions , 2004, SSRN Electronic Journal.

[14]  C. Oliveira,et al.  Immigrants' Entrepreneurial Opportunities: The Case of the Chinese in Portugal , 2003 .

[15]  Fernando Vega-Redondo,et al.  Building Up Social Capital in a Changing World: A Network Approach , 2003 .

[16]  Richard Pearce,et al.  A Biologist's View of Individual Cultural Identity for the Study of Cities , 2003 .

[17]  A. Alberini,et al.  Information and Willingness to Pay in a Contingent Valuation Study: The Value of S. Erasmo in the Lagoon of Venice , 2004 .

[18]  C. Carraro,et al.  Endogenous Strategic Issue Linkage in International Negotiations , 2003 .

[19]  Peter Bogetoft,et al.  DEA-based yardstick competition: The optimality of best practice regulation , 1997, Ann. Oper. Res..

[20]  Jens Horbach,et al.  Employment and Innovations in the Environmental Sector: Determinants and Econometrical Results for Germany , 2003 .

[21]  P. Klemperer.  Auction Theory: A Guide to the Literature , 1999 .

[22]  E. Defrancesco,et al.  The Beginning of Organic Fish Farming in Italy , 2003 .

[23]  L. Simić,et al.  What is Specific about Art/Cultural Projects? , 2003 .

[24]  Matteo Manera,et al.  Star-Garch Models for Stock Market Interactions in the Pacific Basin Region, Japan and Us , 2003 .

[25]  Shlomo Weber,et al.  Languages Disenfranchisement in the European Union , 2004 .

[26]  Bianca Rundshagen,et al.  How the Rules of Coalition Formation Affect Stability of International Environmental Agreements , 2003 .

[27]  Lori S. Bennear,et al.  Private Options to Use Public Goods: Exploiting Revealed Preferences to Estimate Environmental Benefits , 2003 .

[28]  Kiflemariam Hamde,et al.  Mind in Africa, Body in Europe: The Struggle for Maintaining and Transforming Cultural Identity - a Note from the Experience of Eritrean Immigrants in Stockholm , 2004 .

[29]  Ohad Kadan,et al.  Equilibrium in the two-player, k-double auction with affiliated private values , 2007, J. Econ. Theory.

[30]  U. Latacz-Lohmann,et al.  Auctioning Conservation Contracts: A Theoretical Analysis and an Application , 1997 .

[31]  Ronnie Schöb,et al.  The Double Dividend Hypothesis of Environmental Taxes: A Survey , 2003 .

[32]  Kristine Crane,et al.  The City as an Arena for the Expression of Multiple Identities In the Age of Globalisation and Migration , 2003 .

[33]  S. B. Youssef,et al.  Transboundary Pollution, R&D Spillovers and International Trade , 2003 .

[34]  Riaz Shareef,et al.  Country Risk Ratings of Small Island Tourism Economies , 2004 .

[35]  A. Cavaliere,et al.  Price Competition with Information Disparities in a Vertically Differentiated Duopoly , 2004 .

[36]  Sergio Currarini,et al.  Coalition Formation in Games Without Synergies , 2004, IGTR.

[37]  Marta Stryszowska,et al.  Late and Multiple Bidding in Competing Second Price Internet Auctions , 2004 .

[38]  C. Carraro,et al.  Endogenous Minimum Participation in International Environmental Treaties , 2003 .

[39]  Shlomo Weber,et al.  Strategic Immigration Policies and Welfare in Heterogeneous Countries , 2004 .

[40]  A. Sela,et al.  All-Pay Auctions with Weakly Risk-Averse Buyers , 2004 .

[41]  Reinhard Selten,et al.  Social Conformity in Games with Many Players , 2003 .

[42]  Policy design and the optimal location of forests in Flanders , 2005 .

[43]  Céline Nauges,et al.  The French Tax on Air Pollution: Some Preliminary Results On its Effectiveness , 2003 .

[44]  Klaus Conrad,et al.  Price Competition and Product Differentiation When Consumers Care for the Environment , 2005 .

[45]  Kazuma Matoba,et al.  Glocal Dialogue Transformation Through Transcultural Communication , 2003 .

[46]  Timo Goeschl,et al.  On Biology and Technology: The Economics of Managing Biotechnologies , 2003 .

[47]  George A. Akerlof.  The Market for “Lemons”: Quality Uncertainty and the Market Mechanism , 1970 .

[48]  Sonia Oreffice,et al.  Abortion and Female Power in the Household Evidence from Labor Supply , 2003 .

[49]  ZhongXiang Zhang,et al.  Open Trade with the U.S. Without Compromising Canada's Ability to Comply with its Kyoto Target , 2003 .

[50]  A. Mauleon,et al.  Farsightedness and Cautiousness in Coalition Formation , 2003 .

[51]  Angelo Antoci,et al.  Biodiversity and Economic Growth: Stabilization Versus Preservation of the Ecological Dynamics , 2004 .

[52]  Raúl Hernández Martín.  Impact of Tourism Consumption on GDP. The Role of Imports , 2004 .

[53]  U. Latacz-Lohmann,et al.  Auctions as a Means of Creating a Market for Public Goods from Agriculture , 1998 .

[54]  Marzio Galeotti,et al.  Weather Impacts on Natural, Social and Economic Systems (Wise) - Part I: Sectoral Analysis of Climate Impacts in Italy , 2004 .

[55]  Bernard Salanié,et al.  The Economics of Contracts: A Primer , 1997 .

[56]  Inés Macho-Stadler,et al.  An Introduction to the Economics of Information: Incentives and Contracts , 1997 .

[57]  Natalya V. Taranova,et al.  The Role of the City in Fostering Intergroup Communication in a Multicultural Environment: Saint-Petersburg's Case , 2003 .

[58]  Henk Folmer,et al.  Profiling Tourists for Balanced Utilization of Tourism-Based Resources in Kenya , 2004 .

[59]  F. S. Jensen,et al.  Forest recreation in Denmark from the 1970s to the 1990s [including 4 manuscripts] , 1999 .

[60]  Elbert Dijkgraaf,et al.  Burn or Bury? A Social Cost Comparison of Final Waste Disposal Methods , 2003 .