Moral Hazard, Externalities, and Compensation for Crop Damages from Wildlife

A principal–multiple agent model is used to examine wildlife damage abatement and compensation programs in a setting in which farmers suffer damages and hunters use the wildlife for recreational purposes. In addition to externalities inherent in abatement, abatement/compensation policy confronts the issue of moral hazard. By representing the principal as a wildlife management authority who acts on behalf of hunters, we investigate contracts in which transfers of more or less severe hunting regulations, a public good that aids in dispersing wildlife, and monetary payments from hunting license fees can be used to overcome moral hazard.