The relation between landholder scale heterogeneity, transaction costs and natural resource management.
The aim of this research is to increase understanding with regards to heterogeneity among rural landholders and the interaction with private transaction costs. I hypothesise that heterogeneous abatement and transaction costs are an important explanation for heterogeneous adoption of BMPs for water quality improvement. Increased understanding with regards to heterogeneity, transaction costs and the interaction between the two can facilitate the selection of cost-effective policy mechanisms. Furthermore, I hypothesise that decreasing transaction costs among heterogeneous agents requires a mixed policy solution and would lead to different outcomes to the community than commonly understood.
This research will make a contribution in the field of natural resource economics and management by moving beyond the use of representative farms in order to increase understanding of the enterprise structural constraints when exposed to natural resource management (NRM). Second, transaction costs (including learning and transition costs) that may affect cost-effectiveness of policy alternatives in achieving environmental goals and potentially reduce the optimal level of abatement from a societal point of view will be identified and quantified. Third, riskiness of environmental projects will be quantified to match landholders risk profile. Integrating the previous steps, in this research a bio-economic mathematical model will be developed that incorporates landholder typology (heterogeneity) and corresponding transaction costs, in a system that is both stochastic and uncertain. It will be used to explore the implications of multi-dimensional heterogeneity for cost-effective policy design and the implications of policy on a heterogeneous farming community.