Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83096
Authors: 
Brandt, Urs Steiner
Jensen, Frank
Hansen, Lars Gårn
Vestergaard, Niels
Year of Publication: 
2004
Series/Report no.: 
Working Paper, Department of Environmental and Business Economics, University of Southern Denmark 58
Abstract: 
Real life implies that public procurement contracting of renewable resources results in repeated interaction between a principal and the agents. The present paper analyses ratchet effects in contracting of renewable resources and how the presence of a resource constraint alters the “standard” ratchet effect result. We use a linear reward scheme to influence the incentives of the agents. It is shown that for some renewable resources we might end up both with more or with less pooling in the first-period compared to a situation without a resource constraint. The reason is that the resource constraint implies a smaller performance de-pendent bonus, which reduces the first-period cost from concealing information but at the same time the resource constraint may also imply that second-period benefits from this concealment for the efficient agent are reduced. In situations with high likelihood of first-period pooling, the appropriateness of applying lin-ear incentive schemes can be questioned.
Subjects: 
Political support function
political economy
environmental regula-tion
lobbyism
rent-seeking
taxation
auction
grandfathering
emission trad-ing
European Union
interest groups
industry
consumers
environmentalists
JEL: 
Q28
H2
H4
Document Type: 
Working Paper
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