Moral Hazard, Externalities, and Compensation for Crop Damages from Wildlife*

A principal]multiple agent model is used to examine wildlife damage abatement and compensation programs in a setting in which farmers suffer damages and hunters use the wildlife for recreational purposes. In addition to externalities inherent in abatement, abatementrcompensation policy confronts the issue of moral hazard. By representing the principal as a wildlife management authority who acts on behalf of hunters, we investigate contracts in which transfers of more or less severe hunting regulations, a public good that aids in dispersing wildlife, and monetary payments from hunting license fees can be used to overcome moral hazard. Q 1996 Academic Press, Inc.