Mechanisms for spatial coordination in payment for ecosystem service schemes

Mechanisms for spatial coordination in payment for ecosystem service schemes
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Mechanisms for spatial coordination in payment for ecosystem service schemes

 

Payment for Ecosystem Service (PES) schemes involve contracts being offered to private landowners or tenants as suppliers of ecosystem services such as flood alleviation, pollution control and biodiversity conservation. The buyer may be private firms or conservation clubs, but more often the government acts as buyer. The optimal design of contracts is complicated by a number of problems, including asymmetric information and the need for spatial coordination of sellers. In this paper, I look at one idea for encouraging spatial coordination, the agglomeration bonus (AB). Using lab experiments, we look at the effects of information on the pay-offs of neighbours and of transactions costs on the outcome of such offers. We find that, in many cases, the game converges to a risk-dominant equilibrium, rather than an equilibrium with better environmental and economic properties.

 

Speaker
Professor Nick Hanley, University of St. Andrews
Hosted by
Dr Nikos Vlassis
Venue
S86 EWB