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This article addresses the informational rents that are created in payments for environmental services (PES) contracts by asymmetric information between landowners and conservation buyers. Three options for reducing informational rents are described and compared: 1)gathering information on compliance costs, 2)screening contracts, and 3)procurement auctions.
Introduction Hidden information Gathering information from costly-to-fake signals Screening contracts Procurement auctions for PES contracts – What are they? – Conservation auctions in practice – Pricing rules – Targeted auctions when contracts vary in quality – Repeated contracting – Other issues in PES auction design PES contracting in low and middle-income nations Conclusion