Incentivizing and Tendering Conservation Contracts: The Trade-off between Participation and Effort Provision

Steven Schilizzi and Uwe Latacz-Lohmann

Abstract

This paper uses lab experiments to investigate landholder responses to, and the resulting outcome performance of, programs that incentivize and tender conservation contracts. Assuming environmental outcome monitoring is costless, we find that increasing the share of payment linked to uncertain environmental outcomes raises the level of individual stewardship effort but reduces participation, thereby creating a trade-off. This leads to a second trade-off: environmental outcome is maximized at some intermediate level of contract incentivization, but cost-effectiveness at 100%. Tendering such contracts can yield additional benefits in terms of both environmental outcome and cost-effectiveness. However, these benefits decline rapidly with rising incentivization. (JEL Q18, Q58)

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