Heterogeneity in Farmers’ Social Preferences and the Design of Green Payment Schemes

Abstract We examine how social preferences affect the workings of voluntary green payment schemes and show that a regulator could use facilitation services along with reward to generate better ecological outcome at less cost by exploiting farmer’s gain social-image/reputation. To motivate our model, we first present results an incentivized elicitation survey in Scotland which shows there is norm biodiversity protection on private land among farmers. Moreover, discrete choice experiment reveal farmers are willing give up economic rents for more publicity their conservation activities; this confirms relevance reputational context schemes. Our model assumes two types farmers, brown , farmer taking actions than farmer. design menu contracts offers both monetary incentives non-monetary (a service reward) induce type join scheme exert first-best levels (i.e., symmetric information levels) action. Results under asymmetric can implement equilibrium only This implies ensure environmental outcomes, lower cost, farmers’ offering incentives.