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Diakoulakis, Georgios N., 2015. (agri)Environmental contracts, dynamic inconsistencies and moral hazard. Second cycle, A2E. Uppsala: SLU, Dept. of Economics

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Abstract

From the beginning of the world, the agricultural sector has always played an essential
role into our society, and contracts have massively been used by policy-makers for the
implementation of (agri)environmental policies, especially when such policies concern
the use and development of privately owned land, and information asymmetries between
policy-makers and individuals exist. Even though the majority of (agri)environmental
contracts are designed assuming individual’s constant time-preferences, recent evidence
from many behavioural studies on individual’s intertemporal choices advocate declining
time-preferences due to behavioural biases, which can be explained by hyperbolic
discounting.
Therefore, in this dissertation we present a theoretical analysis of the impact of
an intertemporal time-inconsistent individual into a contract for the provision of an
(agri)environmental target, under both perfect and imperfect information. Our key finding
suggests that the more inconsistent time-preferences an individual has, the higher
the impact of them into contract design is, unless a commitment mechanism (perfect
information) or higher detection probability of cheaters (imperfect information) is feasible.
We also found that the duration of the contract has a significant impact into it,
only in cases where individuals know precisely (i.e. they have sophisticated beliefs) how inconsistent their time-preferences are.

Main title:(agri)Environmental contracts, dynamic inconsistencies and moral hazard
Authors:Diakoulakis, Georgios N.
Supervisor:Di Corato, Luca
Examiner:Hess, Sebastian
Series:Examensarbete / SLU, Institutionen för ekonomi
Volume/Sequential designation:962
Year of Publication:2015
Level and depth descriptor:Second cycle, A2E
Student's programme affiliation:NM005 Environmental Economics and Management - Master's Programme 120 HEC
Department:(NL, NJ) > Dept. of Economics
Keywords:contract design, behavior, decision-makin, discounting, economics, intertemporal choices
URN:NBN:urn:nbn:se:slu:epsilon-s-4799
Permanent URL:
http://urn.kb.se/resolve?urn=urn:nbn:se:slu:epsilon-s-4799
Subjects:Economics and management
Language:English
Deposited On:01 Sep 2015 14:51
Metadata Last Modified:01 Sep 2015 14:51

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