Auctioning contracts for environmental services

Peter Bardsley and Ingrid Burfurd

Australian Journal of Agricultural and Resource Economics, 2013, vol. 57, issue 2, 20

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.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aareaj:241877

DOI: 10.22004/ag.econ.241877

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