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When should biodiversity tenders contract on outcomes?

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  • Gorddard, Russell J.
  • Whitten, Stuart M.
  • Reeson, Andrew

Abstract

Making conservation program payments conditional on outcomes offers potential efficiency and innovation improvements over input based contracts. This paper explores the trade-offs involved in choosing the payment criteria for biodiversity tenders. A model where the budget for a conservation tender can be allocated to input, outcome or mixed payments is used to explore the impacts of hidden actions, adverse selection, and landholder risk aversion on the optimal policy design. We discuss the implications of these results for the design of the ‘Nest Egg’ tender. This tender is targeting habitat and breeding of ground-nesting birds in the New South Wales Murray Catchment.

Suggested Citation

  • Gorddard, Russell J. & Whitten, Stuart M. & Reeson, Andrew, 2008. "When should biodiversity tenders contract on outcomes?," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 5979, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare08:5979
    DOI: 10.22004/ag.econ.5979
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    1. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    2. R. Preston McAfee & John McMillan, 1986. "Bidding for Contracts: A Principal-Agent Analysis," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 326-338, Autumn.
    3. Uwe Latacz-Lohmann & Carel Van der Hamsvoort, 1997. "Auctioning Conservation Contracts: A Theoretical Analysis and an Application," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 407-418.
    4. Rob Fraser, 2002. "Moral Hazard and Risk Management in Agri‐environmental Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(3), pages 475-487, November.
    5. Adam Ozanne & Ben White, 2007. "Equivalence of Input Quotas and Input Charges under Asymmetric Information in Agri‐environmental Schemes," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(2), pages 260-268, June.
    6. Rob Hart, 2005. "Combating moral hazard in agri-environmental schemes: a multiple-agent approach," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 32(1), pages 75-91, March.
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    Citations

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    Cited by:

    1. Vergamini, Daniele & Viaggi, Davide & Raggi, Meri, 2020. "Evaluating the Potential Contribution of Multi-Attribute Auctions to Achieve Agri-Environmental Targets and Efficient Payment Design," Ecological Economics, Elsevier, vol. 176(C).
    2. David A. Fleming, 2014. "Slippage effects of land-based policies: Evaluating the Conservation Reserve Program using satellite imagery," Papers in Regional Science, Wiley Blackwell, vol. 93, pages 167-178, November.
    3. Peter Bardsley & Ingrid Burfurd, 2008. "Contract Design for Biodiversity Procurement," Department of Economics - Working Papers Series 1031, The University of Melbourne.
    4. Astrid Zabel & Göran Bostedt & Stefanie Engel, 2014. "Performance Payments for Groups: The Case of Carnivore Conservation in Northern Sweden," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 59(4), pages 613-631, December.
    5. Zabel, Astrid & Roe, Brian, 2009. "Optimal design of pro-conservation incentives," Ecological Economics, Elsevier, vol. 69(1), pages 126-134, November.
    6. Zabel, Astrid & Bostedt, Goran & Engel, Stefanie, 2011. "Outcomes and Determinants of Success of a Performance Payment Scheme for Carnivore Conservation," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 115973, European Association of Agricultural Economists.
    7. Schilizzi, Steven & Breustedt, Gunnar & Latacz-Lohmann, Uwe, 2011. "Does tendering conservation contracts with performance payments generate additional benefits?," Working Papers 100883, University of Western Australia, School of Agricultural and Resource Economics.
    8. Elofsson, Katarina & Hiron, Matthew & Kačergytė, Ineta & Pärt, Tomas, 2023. "Ecological compensation of stochastic wetland biodiversity: National or regional policy schemes?," Ecological Economics, Elsevier, vol. 204(PA).
    9. Latacz-Lohmann, U. & Schilizzi, S. & Breustedt, G., 2012. "Auctioning outcome-based conservation contracts," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 47, March.
    10. Latacz-Lohmann, Uwe & Schilizzi, Steven & Breustedt, Gunnar, 2011. "Auctioning Outcome-Based Conservation Contracts," 51st Annual Conference, Halle, Germany, September 28-30, 2011 114523, German Association of Agricultural Economists (GEWISOLA).

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    Environmental Economics and Policy;

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