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Endogenous Social Norms, Mechanism Design, and Payment for Environmental Services

Author

Listed:
  • Qin, Botao
  • Shogren, Jason
Abstract
Herein, we examine the optimal contract design when social norms have a disutility on landowners' participation in payment for environmental services programs. We find that a regulator can use less powerful monetary incentives to induce landowners to retire more land when the regulator appeals to social norms. Next, we consider the case when landowners determine the social norms of land retirement endogenously given that they live in small communities. We find that when there is asymmetric information about personal norms, the high-personal-norm type will retire more than the optimal amount of land and the low-personal-norm type will retire less than the optimal amount of land. We also explore when there is asymmetric information about landowners' sensitivities to social norms. We find that the optimal contract design depends on the relative magnitude of landowners' personal norms and the expected social norms. The results differ from the standard mechanism design literature.

Suggested Citation

  • Qin, Botao & Shogren, Jason, 2023. "Endogenous Social Norms, Mechanism Design, and Payment for Environmental Services," MPRA Paper 112878, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:112878
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    References listed on IDEAS

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    More about this item

    Keywords

    Social norms; Mechanism design; Payment for environmental services; Asymmetric information;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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