Optimal rotation periods: an application of Contract Theory to Forest Regulation

Archive ouverte

Jensen, Frank | Abildtrup, Jens | Stenger-Letheux, Anne | Jacobsen, Jette Bredahl

Edité par CCSD -

In this paper we construct a general principal-agent model to discuss voluntary subsidiesto a forest owner to increase the rotation period in a situation with asymmetric information aboutthe owner´s cost type. It is shown that for the forest owner with low cost the voluntary subsidy shallbe based on differences in the objective functions between the principal and the agent. However, foran owner with high costs the subsidy shall also include an incentive cost to secure correct revelationof the owner´s cost type. The general model is used to study various forest owner objectives such asmaximization of the value of timber, maximization of the social welfare and maximization of a mixbetween the timber value and the social welfare. With welfare maximization there is no differencein the objective functions between the regulator and the forest owner so no contract is necessary.We also investigate the implications of regulator uncertainty about the forest owner payoff. Bothwhen the regulator perceives a wrong objective function for the forest owner and when regulator isuncertain about the objective function of the owner, uncertainty may imply a lower welfarecompared to a situation with full certainty about the forest owners goal.

• Description
• Sujet/Public
• Outil
• Outil d'anticipation
• Mémoire et thèse
• Gestion