Journal of Forest Economics > Vol 12 > Issue 3

Grants for advisory services in the private Danish forestry sector – A principal–agent approach

Suzanne E. Vedel, , sve@kvl.dk Dorthe H. Lund, , Jette B. Jacobsen, , Finn Helles, ,
 
Suggested Citation
Suzanne E. Vedel, Dorthe H. Lund, Jette B. Jacobsen and Finn Helles (2006), "Grants for advisory services in the private Danish forestry sector – A principal–agent approach", Journal of Forest Economics: Vol. 12: No. 3, pp 185-199. http://dx.doi.org/10.1016/j.jfe.2006.08.001

Published: 04 Dec 2006
© 0 2006 Suzanne E. Vedel, Dorthe H. Lund, Jette B. Jacobsen, Finn Helles
 
Subjects
 
Keywords
JEL Codes:Q23Q28
Adverse selectionAdvisory servicesPrincipal–agent theoryPrivate forest owners
 

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In this article:
Introduction
The model
The contract under symmetric information
Principal–agent relationships under asymmetric information
Discussion
Conclusion

Abstract

The Danish government gives a grant to consultant companies offering advisory services to private forest owners. The Danish Forest and Nature Agency and the consultant companies constitute a principal–agent system. The forest owner is not directly part of this relationship, but he has a main impact on it. The consultant companies have private information regarding their costs and assuming that these vary between companies, the government can benefit from introducing differentiated contracts. The informational rent will be determined by the forest owners. One company dominates the market and introducing differentiated contracts may exclude other companies. Increased short run costs may be allowed for in order to attract new consultant companies and increase the competition.

DOI:10.1016/j.jfe.2006.08.001