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A Laboratory Comparison of Uniform and Discriminative Price Auctions for Reducing Non-point Source Pollution

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  • Timothy N. Cason
  • Lata Gangadharan

Abstract

Auctions allow regulators to identify land management changes with substantial environmental benefit and low opportunity cost. This paper reports an experiment in which seller subjects compete in sealed-offer auctions to obtain part of a fixed budget allocated by the experimenter-regulator to subsidize pollution abatement. One treatment employs uniform-price auction rules, whereas another treatment employs discriminative price auction rules. We find that most offers in the uniform-price auction are within 2% of cost, whereas most offers in the discriminative price auction are at least 8% greater than cost. Nevertheless, the discriminativeprice auction has superior overall market performance.

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Bibliographic Info

Article provided by University of Wisconsin Press in its journal Land Economics.

Volume (Year): 81 (2005)
Issue (Month): 1 ()
Pages:

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Handle: RePEc:uwp:landec:v:81:y:2005:i:1:p51-70

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Web page: http://le.uwpress.org/

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  1. Tenorio, Rafael, 1993. "Revenue Equivalence and Bidding Behavior in a Multi-unit Auction Market: An Empirical Analysis," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 302-14, May.
  2. Cason, Timothy N. & Gangadharan, Lata & Duke, Charlotte, 2003. "A laboratory study of auctions for reducing non-point source pollution," Journal of Environmental Economics and Management, Elsevier, vol. 46(3), pages 446-471, November.
  3. Back, Kerry & Zender, Jaime F, 1993. "Auctions of Divisible Goods: On the Rationale for the Treasury Experiment," Review of Financial Studies, Society for Financial Studies, vol. 6(4), pages 733-64.
  4. repec:wop:humbsf:2000-72 is not listed on IDEAS
  5. Uwe Latacz-Lohmann & Carel Van der Hamsvoort, 1997. "Auctioning Conservation Contracts: A Theoretical Analysis and an Application," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 407-418.
  6. Sushil Bikhchandani & Chi-fu Huang, 1993. "The Economics of Treasury Securities Markets," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 117-134, Summer.
  7. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
  8. Umlauf, Steven R., 1993. "An empirical study of the Mexican Treasury bill auction," Journal of Financial Economics, Elsevier, vol. 33(3), pages 313-340, June.
  9. Maskin, Eric & Riley, John, 2000. "Asymmetric Auctions," Review of Economic Studies, Wiley Blackwell, vol. 67(3), pages 413-38, July.
  10. Holt, Charles A, Jr, 1980. "Competitive Bidding for Contracts under Alternative Auction Procedures," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 433-45, June.
  11. Cox, James C & Smith, Vernon L & Walker, James M, 1984. " Theory and Behavior of Multiple Unit Discriminative Auctions," Journal of Finance, American Finance Association, vol. 39(4), pages 983-1010, September.
  12. Kagel, John H & Harstad, Ronald M & Levin, Dan, 1987. "Information Impact and Allocation Rules in Auctions with Affiliated Private Values: A Laboratory Study," Econometrica, Econometric Society, vol. 55(6), pages 1275-1304, November.
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