Conservation agreements: Relational contracts with endogenous monitoring

With Heidi Gjertsen, Theodore Groves, Eduard Niesten, Dale Squires, and Joel Watson

Journal of Law, Economics, and Organization, 37(1):1–40, March 2021

Abstract: This paper examines the structure and performance of conservation agreements, which are relational contracts used across the world to protect natural resources. Key elements of these agreements are: (1) they are ongoing arrangements between a local community and an outside party, typically a non-governmental organization (NGO); (2) they feature payments in exchange for conservation services; (3) the prospects for success depend on the NGO engaging in costly monitoring to detect whether the community is foregoing short-term gains to protect the resource; (4) lacking a strong external enforcement system, they rely on self-enforcement; and (5) the parties have the opportunity to renegotiate at any time. A repeated-game model is developed and utilized to organize an evaluation of real conservation agreements, using three case studies as representative examples.

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