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Optimal Forestry Contracts under Asymmetry of Information

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  • Francis Didier Tatoutchoup

Abstract

In this paper, I analyze optimal royalty contracts in forestry when the harvesting firm has private information on the cost of harvesting. This infinite horizon forest rotation model with asymmetry of information on the cost parameter results in a dynamic incentive problem. Depending on whether the costs are correlated over time or not, the firm either receives rent or receives no rent, associated with the continuation part of the rotation choice. I characterize the optimal contract explicitly in both cases. I also examine the loss in expected welfare surplus resulting from the use of a linear contract instead of the more general non-linear contract.

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  • Francis Didier Tatoutchoup, 2015. "Optimal Forestry Contracts under Asymmetry of Information," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(1), pages 84-107, January.
    • Handle: RePEc:bla:scandj:v:117:y:2015:i:1:p:84-107
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    File URL: http://hdl.handle.net/10.1111/sjoe.12083
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    Cited by:

    1. Marco Buso & Cesare Dosi & Michele Moretto, 2023. "Taxation of Public Franchises with Persistent Demand Shocks," "Marco Fanno" Working Papers 0306, Dipartimento di Scienze Economiche "Marco Fanno".
    2. Didier Tatoutchoup Francis & Samuel Njiki Paul, 2020. "Optimal Forestry Contract with Interdependent Costs," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(1), pages 1-13, January.
    3. François Castonguay & Pierre Lasserre, 2016. "Resource Agency Relationship with Privately Known Exploration and Extraction Costs," CIRANO Working Papers 2016s-56, CIRANO.
    4. Tatoutchoup, Francis Didier, 2017. "Forestry auctions with interdependent values: Evidence from timber auctions," Forest Policy and Economics, Elsevier, vol. 80(C), pages 107-115.

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