Advanced Search
MyIDEAS: Login to save this paper or follow this series

Empirical methods for determining a reserve price in conservation auctions

Contents:

Author Info

  • Eigenraam, Mark
  • Chua, Joselito J.
  • Edwards, Claire
Registered author(s):

    Abstract

    Conservation auctions are increasingly being used to procure public environmental goods on private land. In the absence of demand-side price information, the majority of conservation auctions in Australia have been designed without a reserve price. In these instances bids have been accepted in order of cost-effectiveness until the budget constraint binds. It is widely recognised that in situations where auctions are run repeatedly a reserve price strategy could allow for a more efficient allocation of funds across multiple rounds, both spatially and temporally. This paper provides a brief overview of methods for determining a reserve price for application in conservation auctions. It is concluded that information deficiencies and the high transaction costs involved in the application of these methods to conservation auctions often render them unsuitable for application to real-world auctions. This paper presents an empirical approach to determining a reserve price using data obtained during an auction - the supply curve. The approach stems from the C4.5 algorithm, developed in the field of data mining to construct decision trees from training data using the concept of information entropy. The algorithm establishes a reserve price by determining the cut-off price that results in the ”best fit” of two normal distributions to the frequency distribution of bid-price per unit environmental benefit. Empirical data from conservation auctions in Victoria is used to demonstrate the algorithm and compare auction results obtained using the algorithm and traditional ”budget” methods. The paper presents a discussion on the situations where the algorithm could be appropriately used, and advantages and limitations of the approach are identified. The paper concludes that the use of the algorithm can result in efficiency gains over the traditional budget method in situations where alternative reserve price strategies are impractical.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://purl.umn.edu/101406
    Download Restriction: no

    Bibliographic Info

    Paper provided by Australian Agricultural and Resource Economics Society in its series 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia with number 101406.

    as in new window
    Length:
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:ags:aare11:101406

    Contact details of provider:
    Postal: AARES Central Office Manager, Crawford School of Public Policy, ANU, Canberra ACT 0200
    Phone: 0409 032 338
    Email:
    Web page: http://www.aares.info/
    More information through EDIRC

    Related research

    Keywords: Land Economics/Use;

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. 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.
    2. Uwe Latacz-Lohmann & Ian Hodge, 2003. "European agri-environmental policy for the 21st century," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 47(1), pages 123-139, 03.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ags:aare11:101406. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.