The economic theory of contracts is applied to agricultural insurance to show that, given full information, Pareto‐optimal insurance contracts are actuarially fair, provide full coverage, and differ for each individual. The information problems of moral hazard and adverse selection prevent Pareto optimality from being attained. Several “second‐best” solutions to these problems are applied to agricultural insurance. It is shown that information collection and the application of contract design principles are “second‐best” solutions which may achieve the benefits of insurance at less cost than the current practice of public subsidies.

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There are economies of scale in the construction of regional wastewater treatment systems. Effluent dischargers have the option of participating in a regional system or constructing separate smaller systems. In order to encourage participation in a regional system so that the economies are realized, the cost allocation method employed must offer economic incentives. The cost allocation problem is viewed in game theoretic terms, and the Shapley value (a game theory solution) is suggested as an allocation method. The method is applied to the Meramec River Basin in Missouri where eight dischargers are identified. The problems of application are discussed and the reactions of the eight dischargers are cited. INTRODUCTION Comprehensive regional wastewater treatment systems can provide economic and environmental benefits to wastewater dischargers, since it may be less expensive to construct and operate a single large treatment facility than to have numerous smaller facilities for the various discharges. Environmental benefits can arise from the increased reliability possible in larger, better funded systems, and the opportunity to move effluents to those discharge points where they will result in minimal adverse impacts.While regional wastewater treatment systems can be shown to offer significant advantages, such systems are often difficult to implement. The first step in the development of such a system is to determine the location and equipment configuration that yields a least cost solution. Oncea regional system is found to be economically efficient, it must then be "sold" to each discharger and a single regional authority must be formed. Such regional authorities require state and local legislative approval. In some cases, a regional system can be formed as an extension of some previously existent adjacent sanitary agency, or alternatively some existing regional governance can be given increased authority. The formation of such authorities is at,political process often tied to other regional issues, The Areawide Wastewater Treatment Program implemented by EPA under Section 208 of the 1972 Amendments to the Federal Water Pollution Control Act is one atteml•t to deal with these situations.Along with the potential cost savings of regional wastewater treatment systems comes the problem of their distribution: how should economic benefits (cost savings) be distributed among all members of a regional system? If one or more dischargers do not receive what they consider to be their 'fair' share of the benefits (i.e., they are overcharged), they may be encouraged to withdraw from the regional system and treat their effluents in a smaller facility. Thus the least cost solution is not attained and a suboptimum solution results that can be altered to the advantage of all dischargers. This paper is addressed to the problem of implementing a cost allocation method that will provide incentives for least

A previously presented charge scheme for public investments is derived here from a set of axioms. It is argued that these axioms embody a definition of equity in allocating the costs of a public facility and could serve as a constitution which would be agreed on by users of a public facility. Consideration is also given to optimality properties of the charge scheme in encouraging the formation of coalitions to undertake joint investments.