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Auctioning contracts for environmental services

Auctioning contracts for environmental services Policy‐based markets for environmental services include government procurement, private procurement to satisfy regulatory requirements and private procurement through government offset markets. These markets are increasingly popular and raise questions about optimal procurement under different regulatory frameworks. The design of these schemes draws together issues in auction design and contract theory. Using a mixed adverse selection, moral hazard model, we show that optimal contract design may differ significantly between procurement and regulatory policy environments. We model risk averse landholders to preserve a key feature of the policy environment. These findings have implications for the design of pollution reduction schemes and the rehabilitation of environmental assets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Australian Journal of Agricultural Resource Economics Wiley

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Publisher
Wiley
Copyright
Copyright © 2013 Wiley Publishing Asia Pty Ltd and Australian Agricultural and Resource Economics Society Inc.
ISSN
1364-985X
eISSN
1467-8489
DOI
10.1111/j.1467-8489.2012.00615.x
Publisher site
See Article on Publisher Site

Abstract

Policy‐based markets for environmental services include government procurement, private procurement to satisfy regulatory requirements and private procurement through government offset markets. These markets are increasingly popular and raise questions about optimal procurement under different regulatory frameworks. The design of these schemes draws together issues in auction design and contract theory. Using a mixed adverse selection, moral hazard model, we show that optimal contract design may differ significantly between procurement and regulatory policy environments. We model risk averse landholders to preserve a key feature of the policy environment. These findings have implications for the design of pollution reduction schemes and the rehabilitation of environmental assets.

Journal

The Australian Journal of Agricultural Resource EconomicsWiley

Published: Apr 1, 2013

Keywords: ; ; ; ;

References