2002 World Congress of Environmental and Resource Economists

This paper analyses incentive problems involved in private management of publicly owned natural resources. The paper contributes to defining the regulatory role in creating an optimal information environment to maximize welfare from joint public and private good provision. Contract structures are developed to induce optimal conservation of public goods and services under differing assumptions about adverse selection and moral hazard. The associated contracting costs are increasing in the degree of information asymmetry, the total cost of conservation, and the difference in conservation costs across sites with different conservation values. The results imply that conservation contracts to mitigate moral hazard and adverse selection are welfare improving if efficiency gains from private management outweigh contracting costs induced by information asymmetries between regulator and the private sector managers. During institutional transformations, the regulator can choose to retain specific types of information, or to invest in monitoring activities, to reduce the costs of asymmetric information.



	Paper Title:	Private Resource Management And Public Trust: Optimal Resource Conservation Contracts Under Asymmetric Information
	Presenting Author:	Anne-Juliane Huennemeyer (University of Alberta)
	Coauthor 1:	Kimberly Rollins
	Coauthor 2:
	Coauthor 3:
	Abstract:	This paper analyses incentive problems involved in private management of publicly owned natural resources. The paper contributes to defining the regulatory role in creating an optimal information environment to maximize welfare from joint public and private good provision. Contract structures are developed to induce optimal conservation of public goods and services under differing assumptions about adverse selection and moral hazard. The associated contracting costs are increasing in the degree of information asymmetry, the total cost of conservation, and the difference in conservation costs across sites with different conservation values. The results imply that conservation contracts to mitigate moral hazard and adverse selection are welfare improving if efficiency gains from private management outweigh contracting costs induced by information asymmetries between regulator and the private sector managers. During institutional transformations, the regulator can choose to retain specific types of information, or to invest in monitoring activities, to reduce the costs of asymmetric information.
	Link to paper:	http://weber.ucsd.edu/~carsonvs/papers/99.pdf

	Session / Day / Time	1C / Monday / 8:00 - 10:00 am

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