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Equilibrium Behavior in the Conservation Easement Game

Conservation easements allow landowners to collect earnings from their land, while reducing their tax burdens because the land cannot be sold into development. Conservation assures open space amenities for nearby residents, however, the residents bear a tax increase that offsets the owner’s tax reduction. We develop a game-theoretic model of the private monetary incentives induced by conservation easement programs, and use an experiment to verify that conservation decisions are made based on private incentives and without consideration of the public goods conservation provides. This implies that, unless land trusts are discriminating, conservation easements need not lead to optimal conservation, and may even reduce social welfare. (JEL Q20, Q24)