Hidden Action, Risk Aversion and Variable Fines in Agri-Environmental Schemes

10 Pages Posted: 8 May 2008

See all articles by Adam Ozanne

Adam Ozanne

University of Manchester - School of Social Sciences

Ben White

The University of Western Australia - School of Agricultural and Environment

Abstract

This note analyzes the design of agri-environmental schemes for risk-averse producers whose input usage is only observable by costly monitoring. The scheme penalizes producers in proportion to input use in excess of a quota. A striking result is that if the scheme is designed in such a way that producers always comply with the quota, risk aversion is not relevant in determining the level of input use.

Suggested Citation

Ozanne, Adam and White, Ben, Hidden Action, Risk Aversion and Variable Fines in Agri-Environmental Schemes. Australian Journal of Agricultural and Resource Economics, Vol. 52, No. 2, pp. 203-212, June 2008. Available at SSRN: https://ssrn.com/abstract=1130516 or http://dx.doi.org/10.1111/j.1467-8489.2008.00408.x

Adam Ozanne (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Ben White

The University of Western Australia - School of Agricultural and Environment ( email )

Nedlands, Western Australia 6907
Australia

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