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Tag: institutions

Contracts versus Trust for Transfers of Nature’s Services: equity and efficiency in resource allocation and environmental provision

Published October 16, 2018 by Alex Pfaff
Alexander Pfaff, Maria Alejandra Velez, Amar Hamoudi, Renzo Taddei, Kenneth Broad
Water Resources & Economics 2018 http://dx.doi.org/10.1016/j.wre.2018.04.001

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Managing natural-resource allocation and environmental externalities is a challenge. Institutional designs are central when improving water quality for downstream users, for instance, and when reallocating water quantities including for climate adaptation. Views differ on which institutions are best: states; markets; or informal institutions. For transfers of ecosystem services, we compare informal trust-based institutions to enforced contracts, both being institutional types we observe commonly in the field. The trust-based institutions lack binding promises, thus ecosystem-services suppliers are unsure about the compensation they will receive for transferring services to users. We employ decision experiments given the shortcomings of the alternative methods for empirical study of institutions, as well as the limits on theoretical prediction about behaviors under trust. In our bargaining game that decouples equity and efficiency, we find that enforced contracts increased efficiency as well as all measures of equity. This informs the design of institutions to manage transfers of ecosystem services, as equity in surplus sharing is important in of itself and in permitting efficient allocation.

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Framed field experiment on resource scarcity & extraction: path-dependent generosity within sequential water appropriation

Published July 1, 2015 by Alex Pfaff
Alexander Pfaff, Maria Alejandra Vélez, Pablo Andres Ramos, Adriana Molina
Ecological Economics 120 (2015) 416–429

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How one treats others is important within collective action. We ask if resource scarcity in the past, due to its effects upon past behaviors, influences current other-regarding behaviors. Contrasting theories and empirical findings on scarcity motivate our framed field experiment. Participants are rural Colombian farmers who have experienced scarcity of water within irrigation. We randomly assign participants to groups and places on group canals. Places order extraction decisions. Our treatments are sequences of scarcities: ‘from lower to higher resources’ involves four rounds each of 20, 60, then 100 units of water; ‘from higher to lower resources’ reverses the ordering. We find that upstream farmers extract more, but a lower share, when facing higher resources. Further they take a larger share of higher resources when they faced lower resources in earlier rounds (relative to when facing higher resources initially). That is inconsistent with leading models of responses to scarcity which focus upon one’s own gain. It is consistent with lowering one’s weight on others to, for instance, rationalize having left them little. Our results suggest that facing higher scarcity can erode the bases for collective actions. For establishing new institutions, timing relative to scarcity could affect the probability of success.

 

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Unequal Information, Unequal Allocation: bargaining field experiments in NE Brazil

Published January 1, 2013 by Alex Pfaff
Alexander Pfaff, Maria Alejandra Velez, Renzo Taddei, Kenneth Broad
Environmental Science & Policy 26 (2013) 90-101

PDF link iconWe assess how unequal information affects the bargaining within resource allocation, a stakeholder interaction that is critical for climate adaptation within the water sector. Motivated by water allocation among unequal actors in NE Brazil, within Ceara´ State, we employ ‘ultimatum’ field experiments in which one participant lacks information. We find that, despite having veto power, the less informed are vulnerable to inequity. When all are informed, we see a typical resource split (60% initiator–40% responder) that balances an initiator’s advantage with a responder’s willingness to punish greed. When instead responders have only a resource forecast upon which to base decisions, the fully informed initiators get 80% of resources for conditions of resource scarcity. Thus, despite each of the stakeholder types having an unquestioned ‘seat at the table’, information asymmetries make bargaining outcomes more unequal. Our results are widely relevant for adaptation involving the joint use of information, and suggest that equity can rise with dissemination of scientific outputs that are integral in adaptation.

 

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The Advantage of Resource Queues over Spot Resource Markets: decision coordination in experiments under resource uncertainty

Published January 1, 2012 by Alex Pfaff
Miguel Fonseca, Alexander Pfaff, Daniel Osgood
Amer. J. Agr. Econ. 94(5): 1136–1153; doi: 10.1093/ajae/aas065

PDF link iconFarmers have to make key decisions, such as which crops to plant or whether to prepare the soil, before knowing how much water they will get.They face losses if they make costly decisions but do not receive water, and they may forego profits if they receive water without being prepared.We consider the coordination of farmers’ decisions, such as which crops to plant or whether to prepare the soil when farmers must divide an uncertain water supply. We compare ex-ante queues (pre-decision) to an ex-post spot market (post-decision & post-rain) in experiments in rural Brazil and a university in England. Queues have greater coordination success than does the spot market.

 

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Efficiency and equity in negotiated resource transfers: contributions and limitations of trust with limited contracts

Published January 2, 2011 by Alex Pfaff
Alexander Pfaff, Maria Alejandra Velez
Ecological Economics 74 (2012) 55–63

PDF link iconWe consider a case of water reallocation in Brazil, one which has numerous analogs elsewhere. To permit empirical study of the effects of institutions that can facilitate or restrict  allocations, we conducted field experiments to explore trust’s potential when resource contracts are limited, using a novel asymmetric-productivity ultimatum game with a final surplus-sharing step added. As a form of informal institution, trust could in principle make rights and contracts unnecessary. We observe whether trust in compensation is in fact expected and expressed. We also explore whether trust is exploited, and the effect of communication, within our two bargaining structures: (1) no communication; and (2) with a non-binding message concerning the surplus to be shared. We see that our participants both expect and express trust that some of the surplus will be shared. Trust raises total output and some surplus is indeed shared: those who trust gain a bit on average; and the more trust was shown, the more was shared. However, often the trust was barely repaid. Further, the messages—found to help in other research—had little impact and were often untrue. In sum, trust does matter but both efficiency and equity could well rise with complete contracts.

 

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Climate, Stream Flow Prediction and Water Management in Northeast Brazil: societal trends and forecast value

Published January 1, 2007 by Alex Pfaff
Kenneth Broad, Alexander Pfaff, Renzo Taddei, Sankar Arumugam, Upmanu Lall, Francisco Assis de Souza Filho
Climatic Change (2007) 84:217–239

PDF link iconWe assess the potential benefits from innovative forecasts of the stream flows that replenish reservoirs in the semi-arid state of Ceará, Brazil. Such forecasts have many potential applications. In Ceará, they matter for both water-allocation and participatory-governance issues that echo global debates. Our qualitative analysis, based upon extensive fieldwork with farmers, agencies, politicians and other key actors in the water sector, stresses that forecast value changes as a society shifts. In the case of Ceará, current constraints on the use of these forecasts are likely to be reduced by shifts in water demand, water allocation in the agricultural Jaguaribe Valley, participatory processes for water allocation between this valley and the capital city of Fortaleza, and risk perception. Such changes in the water sector can also have major distributional impacts.

 

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