Material interests, moral reputation, and crowding out species protection on private land

We consider how the reputation of being socially responsible works as an effective source of motivation in protecting a public good, such as endangered species. This paper investigates the mechanism design for endangered species protection on private land under asymmetric information about reputation and land quality. We examine optimal monetary transfer by designing an efficient mechanism which takes into account the crowding out effect of monetary rewards on socially responsible behavior. We find landowners who have good reputation contribute more than the optimum level. Landowners with poor reputation sacrifices information rent; rather they buy reputation.