Christopher Stapenhurst (Brandenburg University of Technology) will present “Relative Performance Payments: Improving Result-Based Compensation for Biodiversity Conservation” on May 22nd, 2026, at 10:30 AM, in room QA323.
Abstract:
Result-based compensation for biodiversity conservation attracts owners of ecologically valuable sites and incentivizes innovation in conservation approaches, but exposes landholders to risk: stochastic events such as extreme weather can prevent species occurrence. Compensating landholders for this risk to secure their participation is costly. We propose relative performance schemes as a novel instrument for reducing these risks. These schemes supplement a standard result-based payment (tied to own-site biodiversity) with a component rewarding performance relative to the regional average. This structure provides insurance: when a common shock depresses biodiversity across the whole region, a landholder’s relative performance is preserved even as absolute outcomes fall, so the relative-payment component compensates for lost result-based income. Relative performance schemes thus hedge common risks while preserving marginal incentives for conservation effort.
Using a contract theory model with heterogeneous landholders and general biodiversity correlation structures, we characterize optimal relative performance schemes and compare them against a simple result-based benchmark. We calibrate our model using climate and management cost data to derive the optimal scheme for 5 bird species in the Aller floodplain in Lower Saxony, and study its sensitivity to model misspecification.