Team Approaches for Agricultural Nonpoint Source Water Pollution Control

Nonpoint source water pollution, primarily from agricultural sources, is a major cause of water quality impairment. Uncertainty and asymmetric information are the key regulatory difficulties in the control of agricultural NPSP. The main target of this study is to describe a potential incentive scheme that can be applied in limited information situations. Team contracts built upon principal-agent theory are proposed. To handle the incentive problems typical in many principal agent problems, it incorporates peer monitoring to induce the nonpoint sources water pollution to meet their contractual obligations.