How to Organise Nature Production by Farmers

Louis H G Slangen

European Review of Agricultural Economics, 1997, vol. 24, issue 3-4, 508-29

Abstract: When farmers contract to produce 'nature,' they act as agents to the government's principal. Principal-agent theory provides a comprehensive analytical framework for studying this relationship. The principal and agent must cope with uncertainty and asymmetrical and imperfect information, and therefore transactions may take place under adverse selection and moral hazard. The farmers' uncertainty relates to the contract and the government's inconsistency over time. Also important is their attitude to risk. A participation bonus equilibrium. Farmers can anticipate the uncertainties of government time inconsistencies by adopting a more risk-averse position. Copyright 1997 by Oxford University Press.

Date: 1997
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European Review of Agricultural Economics is currently edited by Timothy Richards, Salvatore Di Falco, Céline Nauges and Vincenzina Caputo

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