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Assessing the Performance of Conservation Auctions: An Experimental Study

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  • Steven Schilizzi
  • Uwe Latacz-Lohmann
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    Abstract

    This work uses controlled laboratory experiments to investigate the budgetary and the economic performance of competitive tenders for allocating conservation contracts to landholders. Experiments have been replicated in two different countries to check for robustness of results. We find that auctions outperform the more traditional fixed-price programs only in the one-shot setting. With repetition, the auctions quickly lose their edge. The budget-constrained auction performs similarly to the target-constrained in the one-shot setting but appears more robust to repetition. Our results suggest that previous estimates of conservation auction performance are too optimistic, and we propose a method for improving such estimates.

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    Bibliographic Info

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

    Volume (Year): 83 (2007)
    Issue (Month): 4 ()
    Pages: 497-515

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    Handle: RePEc:uwp:landec:v:83:y:2007:i:4:p:497-515

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    1. Paul Klemperer, 2004. "Auctions: Theory and Practice," Economics Papers, Economics Group, Nuffield College, University of Oxford 2004-W09, Economics Group, Nuffield College, University of Oxford.
    2. Paul Klemperer, 2000. "What Really Matters in Auction Design," Economics Series Working Papers, University of Oxford, Department of Economics 2000-W26, University of Oxford, Department of Economics.
    3. Timothy N. Cason & Lata Gangadharan, 2003. "A Laboratory Comparison Of Uniform And Discriminative Price Auctions Forreducing Non-Point Source Pollution," Department of Economics - Working Papers Series, The University of Melbourne 882, The University of Melbourne.
    4. Babcock, Bruce A. & Lakshminarayan, P. G. & Wu, JunJie & Zilberman, David, 1996. "Economics of a Public Fund for Environmental Amenities (The)," Staff General Research Papers, Iowa State University, Department of Economics 1065, Iowa State University, Department of Economics.
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    6. John B. Walden & James E. Kirkley & Andrew W. Kitts, 2003. "A Limited Economic Assessment of the Northeast Groundfish Fishery Buyout Program," Land Economics, University of Wisconsin Press, University of Wisconsin Press, vol. 79(3), pages 426-439.
    7. 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, Agricultural and Applied Economics Association, vol. 79(2), pages 407-418.
    8. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 3(3), pages 3-22, Summer.
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    11. Atakelty Hailu & Steven Schilizzi, 2004. "Are Auctions More Efficient Than Fixed Price Schemes When Bidders Learn?," Australian Journal of Management, Australian School of Business, Australian School of Business, vol. 29(2), pages 147-168, December.
    12. Holland, Dan & Gudmundsson, Eyjolfur & Gates, John, 1999. "Do fishing vessel buyback programs work: A survey of the evidence," Marine Policy, Elsevier, Elsevier, vol. 23(1), pages 47-69, January.
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    14. Johansson, Robert C., 2006. "Participant Bidding Enhances Cost Effectiveness," Economic Brief, United States Department of Agriculture, Economic Research Service 34085, United States Department of Agriculture, Economic Research Service.
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    Cited by:
    1. Lennox, Gareth D. & Gaston, Kevin J. & Acs, Szvetlana & Dallimer, Martin & Hanley, Nick & Armsworth, Paul R., 2013. "Conservation when landowners have bargaining power: Continuous conservation investments and cost uncertainty," Ecological Economics, Elsevier, Elsevier, vol. 93(C), pages 69-78.
    2. Vogt, Nora & Reeson, Andrew F. & Bizer, Kilian, 2013. "Communication, competition and social gift exchange in an auction for public good provision," Ecological Economics, Elsevier, Elsevier, vol. 93(C), pages 11-19.
    3. Ajayi, Oluyede C. & Jack, B. Kelsey & Leimona, Beria, 2012. "Auction Design for the Private Provision of Public Goods in Developing Countries: Lessons from Payments for Environmental Services in Malawi and Indonesia," World Development, Elsevier, Elsevier, vol. 40(6), pages 1213-1223.
    4. Breustedt, Gunnar & Latacz-Lohmann, Uwe & Schilizzi, Steven, 2007. "EIN OKONOMISCHES AUKTIONSEXPERIMENT ZUR AUSWAHL DER TEILNEHMER AN UMWELTSCHUTZPROGRAMMEN (German)," 47th Annual Conference, Weihenstephan, Germany, September 26-28, 2007, German Association of Agricultural Economists (GEWISOLA) 7607, German Association of Agricultural Economists (GEWISOLA).
    5. Hellerstein, Daniel & Higgins, Nathaniel, 2010. "The Effective Use of Limited Information: Do Bid Maximums Reduce Procurement Cost in Asymmetric Auctions?," MPRA Paper 25268, University Library of Munich, Germany.
    6. Nick Hanley & Simanti Banerjee & Gareth D. Lennox & Paul R. Armsworth, 2012. "How should we incentivize private landowners to ‘produce’ more biodiversity?," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 28(1), pages 93-113, Spring.
    7. Latacz-Lohmann, Uwe & Schilizzi, Steven & Breustedt, Gunnar, 2011. "Auctioning Outcome-Based Conservation Contracts," 51st Annual Conference, Halle, Germany, September 28-30, 2011, German Association of Agricultural Economists (GEWISOLA) 114523, German Association of Agricultural Economists (GEWISOLA).
    8. Vogt, Nora & Bizer, Kilian, 2013. "Lock-in effects in competitive bidding schemes for payments for ecosystem services: Revisiting the fundamental transformation," Center for European, Governance and Economic Development Research Discussion Papers, University of Goettingen, Department of Economics 158, University of Goettingen, Department of Economics.
    9. Lewis, David J. & Plantinga, Andrew J. & Nelson, Erik & Polasky, Stephen, 2011. "The efficiency of voluntary incentive policies for preventing biodiversity loss," Resource and Energy Economics, Elsevier, Elsevier, vol. 33(1), pages 192-211, January.
    10. Boxall, Peter C. & Weber, Marian & Perger, Orsolya & Cutlac, Marius & Samarawickrema, Antony, 2008. "Results from the Farm Behaviour Component of the Integrated Economic-Hydrologic Model for the Watershed Evaluation of Beneficial Management Practices Program," Project Report Series, University of Alberta, Department of Resource Economics and Environmental Sociology 116268, University of Alberta, Department of Resource Economics and Environmental Sociology.
    11. Juutinen, Artti & Mäntymaa, Erkki & Ollikainen, Markku, 2013. "Landowners’ conservation motives and the size of information rents in environmental bidding systems," Journal of Forest Economics, Elsevier, Elsevier, vol. 19(2), pages 128-148.
    12. Kentaro Kawasaki & Takeshi Fujie & Kentaro Koito & Norikazu Inoue & Hiroki Sasaki, 2012. "Conservation Auctions and Compliance: Theory and Evidence from Laboratory Experiments," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 52(2), pages 157-179, June.
    13. Laura Brown & Elizabeth Troutt & Cynthia Edwards & Brian Gray & Wanjing Hu, 2011. "A Uniform Price Auction for Conservation Easements in the Canadian Prairies," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 50(1), pages 49-60, September.
    14. Reeson, Andrew F. & Rodriguez, Luis C. & Whitten, Stuart M. & Williams, Kristen & Nolles, Karel & Windle, Jill & Rolfe, John, 2011. "Adapting auctions for the provision of ecosystem services at the landscape scale," Ecological Economics, Elsevier, Elsevier, vol. 70(9), pages 1621-1627, July.
    15. Schilizzi, Steven, 2012. "How can we evaluate conservation auctions? Three Possible methods," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia, Australian Agricultural and Resource Economics Society 124442, Australian Agricultural and Resource Economics Society.
    16. Narloch, Ulf & Drucker, Adam G. & Pascual, Unai, 2011. "Payments for agrobiodiversity conservation services for sustained on-farm utilization of plant and animal genetic resources," Ecological Economics, Elsevier, Elsevier, vol. 70(11), pages 1837-1845, September.
    17. Schilizzi, Steven & Latacz-Lohmann, Uwe, 2009. "Predicting the performance of conservation tenders when information on bidders's costs is limited," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia, Australian Agricultural and Resource Economics Society 48171, Australian Agricultural and Resource Economics Society.

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