Frontiers of Biodiversity Economics, Cambridge University Press
This chapter is structured as follows. Section 2 describes a simple model of interactions in the context of deforestation, based on an equilibrium in beliefs about the neighbours’ actions. Section 3 discusses empirical issues in measurement of interactions and the benefits of using an instrumental variable approach. Data requirements for analysing neighbours’ interactions in deforestation decisions are discussed in section 4. Finally, results for two regions within Costa Rica, as well as discussion of how to obtain the equilibria once the parameters of the model are estimated, are presented in section 5.