Urban greenery management problems

In this paper, we look at the urban greenery management as a principal-agent (PA) problem. PA problems arise whenever the management of activity requires cooperation of at least two hierarchical levels. In the case analysed in this paper, the city mayor (the higher level) wants to maximise the pollution-mitigation capacity of trees planted; the greenery manager (the lower level) wants to maximise the municipal budget devoted to planting trees subject to some constraints on the outcome of this activity. While the higher level wants certain services to be delivered in the future actually, the lower level is interested in the potential benefits provided by the most attractive tree species, even though they will be delivered only partially and probably in the short run only. As a result, the species composition of trees planted is different from what it would have been if the PA model implemented was incentive compatible.