Harnessing social norms to gain cost-effectiveness in conservation schemes through dynamic scheme design: implications of bounded rationality and other-regarding preferences for Payments for Ecosystem Services (PES)

De Petris, Caterina and Drechsler, Martin (2023): Harnessing social norms to gain cost-effectiveness in conservation schemes through dynamic scheme design: implications of bounded rationality and other-regarding preferences for Payments for Ecosystem Services (PES).

Abstract

Payments for Ecosystem Services (PES) are an incentive-based policy instrument encouraging landowners to adopt conservation practices that enhance ecosystem services in exchange for a compensation payment. PES schemes vary considerably in their design, yielding important implications for their conservation outcome and their cost-effectiveness. Given that a landowner’s probability of re-enrolling in a PES scheme is significantly influenced by social norms, this article explores whether the cost-effectiveness of PES schemes could be increased by leveraging on social norms. In particular, we explore whether designing dynamic PES schemes in which a homogenous PES payment is reduced in subsequent contracts would be more cost-effective than static schemes under the assumption that some landowners will enrol or re-enrol in the scheme encouraged by the behaviours of neighbouring landowners. We analyse whether, by initially setting a high payment so as to build a partially conserved landscape, it would be possible to leverage on social norms and reduce the PES payment without losing much conservation engagement. For this purpose, a conceptual agent-based simulation model entailing social norms and bounded rationality as well as other-regarding preferences has been developed.

• Item Type: MPRA Paper
• Language: English
• Keywords: Payment for Ecosystem Services (PES); agri-environment schemes (AES); social norms; bounded rationality; ecological-economic modelling; agent-based modelling (ABM)
• Subjects: C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q57 - Ecological Economics: Ecosystem Services ; Biodiversity Conservation ; Bioeconomics ; Industrial Ecology; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q58 - Government Policy

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