Incentive Contract Design for Governmental Forest Ecological Benefit Compensation Under Information Asymmetry

In the process of forest ecological benefit compensation, there are problems of information asymmetry and "misaligned incentives", which will reduce the compensation efficiency. In order to improve the compensation efficiency, based on principal-agent theory, this study constructs incentive contract models for governmental forest ecological benefit compensation under three different scenarios, namely, information symmetry, single-sided information asymmetry, and double-sided information asymmetry. The study finds that the government can design different incentive contracts to motivate forest farmers with high and low forestry capabilities. And the government's expected utility is influenced by the proportion of forest farmers with high and low forestry capabilities in reality. Due to the information gap between the government and forest farmers, it is inevitable that high-capability forest farmers will obtain an information rent. Under double-sided information asymmetry, the incentive coefficient for lower-capability forest farmers and their optimal actual public welfare forest conservation area decrease as the proportion of high-capability forest farmers increases. Furthermore, when the proportion of high-capability forest farmers exceeds a certain threshold, signing compensation contracts with low-capability forest farmers can harm the government's interests. The research conclusions provide a scientific basis for the government to formulate differentiated incentive contracts for forest ecological benefits. This can effectively align forest farmers' conservation behaviors with the improvement of public forest ecological benefits. As a result, it contributes to improving the efficiency of forest ecological benefit compensation.