Does tendering conservation contracts with performance payments generate additional benefits?

Policy makers aiming to get private landholders to supply non-marketed environmental services may need to provide efficient economic incentives. Two ideas have been explored to achieve this: linking contract payments to environmental outcomes and submitting the contracts to competitive tender. This paper investigates whether there are any gains to be had by combining the potential benefits of both approaches. Landholders’ risk aversion to only partially controlled outcomes may offset incentive effects if the fall in participation outweighs any increases in individual effort. Controlled lab experiments were designed on the basis of a theoretical model and were run in two countries, with varying rates of payments linked to environmental outcomes. Results suggest that it can be counterproductive in terms of expected environmental outcomes to combine tenders with incentive payments, especially when the target population is known to be risk-averse.


Issue Date:
Feb 18 2011
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/100883
Total Pages:
39
JEL Codes:
C92; D44; D82; D86; H57; Q24; Q28
Series Statement:
Working Paper
1102




 Record created 2017-04-01, last modified 2017-11-25

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