Regulating nitrogen pollution with risk averse farmers under hidden information and moral hazard

  • Bontems P
  • Thomas A
  • 13


    Mendeley users who have this article in their library.
  • 7


    Citations of this article.


We consider a model of pollution regulation for a risk averse farmer involving hidden information, moral hazard, and risk-sharing. The representative farmer faces a production risk originating from nitrogen leaching, and privately observes the soil capacity in retaining nitrogen only after the regula- tion contract is signed. The latter specifies a transfer and a nitrogen quota, whose decomposition by the farmer among different production stages is unknown to the regulator.We first characterize the optimal solution to the regulator’s problem. The sequential decision model is estimated on French crop production data, and the results are used to calibrate and simulate the optimal contract.

Author-supplied keywords

  • Asymmetric information
  • Mechanism design
  • Moral hazard
  • Nonpoint source pollution
  • Risk aversion
  • Split nitrogen application

Get free article suggestions today

Mendeley saves you time finding and organizing research

Sign up here
Already have an account ?Sign in

Find this document


Cite this document

Choose a citation style from the tabs below

Save time finding and organizing research with Mendeley

Sign up for free