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Using Field Experiments to Explore the Use of Multiple Bidding Rounds in Conservation Auctions

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  • Rolfe, John
  • Windle, Jill
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    Abstract

    Conservation auctions such as the Conservation Reserve Program in the United States and the BushTender Program in Australia have been used to identify landholders who can provide on-farm conservation and biodiversity protection actions at lowest cost. These conservation auctions are typically framed as closed, discriminatory, single round, first-price auctions, and are based on the assumption that landholders will offer bids determined by their 'independent private values'. However bid values may also be influenced by other factors such as concerns about 'winner's curse', a desire to capture economic rent, and premiums for risk and uncertainty factors. Sealed, single round auctions may exacerbate information gaps and uncertainty factors because of the limited information flows compared to traditional market exchanges and open, ascending auctions. In this paper, the cost-efficiencies of a multiple round auction for landholder management actions are explored with the use of field experiments. Results suggest that multiple round auctions may be associated with efficiency gains, particularly in initial rounds. However, multiple round auctions can also involve higher transaction and administration costs, so the net advantages need to be assessed on a case by case basis before these are used to purchase environmental services.

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    File URL: http://purl.umn.edu/25801
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    Bibliographic Info

    Paper provided by International Association of Agricultural Economists in its series Discussion Papers with number 25801.

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    Date of creation: 2006
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    Handle: RePEc:ags:iaaedp:25801

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    Keywords: Resource /Energy Economics and Policy;

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    1. Jason F. Shogren & John A. List & Dermot J. Hayes, 2000. "Preference Learning in Consecutive Experimental Auctions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 1016-1021.
    2. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    3. 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.
    4. Ferdinando Colombo, 2003. "Auctions With A Minimum Requirement Of Bids," Australian Economic Papers, Wiley Blackwell, vol. 42(4), pages 363-372, December.
    5. John A. List & David Lucking-Reiley, 2002. "Bidding Behavior and Decision Costs in Field Experiments," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 611-619, October.
    6. Ronald G. Cummings & Charles A. Holt & Susan K. Laury, 2004. "Using laboratory experiments for policymaking: An example from the Georgia irrigation reduction auction," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 23(2), pages 341-363.
    7. Paul Klemperer, 2000. "What Really Matters in Auction Design," Economics Series Working Papers 2000-W26, University of Oxford, Department of Economics.
    8. Hong, Han & Shum, Matthew, 2002. "Increasing Competition and the Winner's Curse: Evidence from Procurement," Review of Economic Studies, Wiley Blackwell, vol. 69(4), pages 871-98, October.
    9. Kagel, John H & Levin, Dan, 1993. "Independent Private Value Auctions: Bidder Behaviour in First-, Second- and Third-Price Auctions with Varying Numbers of Bidders," Economic Journal, Royal Economic Society, vol. 103(419), pages 868-79, July.
    10. Jason F. Shogren, 2004. "Incentive Mechanism Testbeds: Discussion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1218-1219.
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    12. Jayson Lusk & T Feldkamp & T Schroeder, 2004. "Experimental auction procedure: Impact on valuation of quality differentiated goods," Artefactual Field Experiments 00097, The Field Experiments Website.
    13. John List & Jason Shogren, 1998. "Calibration of the difference between actual and hypothetical valuations in a field experiment," Natural Field Experiments 00296, The Field Experiments Website.
    14. John A. List & Jason F. Shogren, 1999. "Price Information and Bidding Behavior in Repeated Second-Price Auctions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 942-949.
    15. Timothy N. Cason & Lata Gangadharan, 2004. "Auction Design for Voluntary Conservation Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1211-1217.
    16. 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.
    17. 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 882, The University of Melbourne.
    18. 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.
    19. Alvin E. Roth, 2002. "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics," Econometrica, Econometric Society, vol. 70(4), pages 1341-1378, July.
    20. Amar Cheema & Peter Leszczyc & Rajesh Bagchi & Richard Bagozzi & James Cox & Utpal Dholakia & Eric Greenleaf & Amit Pazgal & Michael Rothkopf & Michael Shen & Shyam Sunder & Robert Zeithammer, 2005. "Economics, Psychology, and Social Dynamics of Consumer Bidding in Auctions," Marketing Letters, Springer, vol. 16(3), pages 401-413, December.
    21. Uwe Latacz-Lohmann & Carel P. C. M. Hamsvoort, 1998. "Auctions as a Means of Creating a Market for Public Goods from Agriculture," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(3), pages 334-345.
    22. Gary Stoneham & Vivek Chaudhri & Arthur Ha & Loris Strappazzon, 2003. "Auctions for conservation contracts: an empirical examination of Victoria's BushTender trial," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 47(4), pages 477-500, December.
    23. Ruben N. Lubowski & Michael J. Roberts, 2005. "How Cost-Effective Are Land Retirement Auctions? Estimating the Difference between Payments and Willingness to Accept in the Conservation Reserve Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(5), pages 1239-1247.
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    Cited by:
    1. Glebe, Thilo W., 2011. "Tendering conservation contracts: Should information on environmental benefits be disclosed or concealed?," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114625, European Association of Agricultural Economists.
    2. Avitia, Jessica & Costa-Font, Montserrat & Gil, Jose Maria & Lusk, Jayson L. & Echeverria, Gemma, 2012. "The Role of sensory experience on Spanish consumer’s willingness to pay for sustainable produced food," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126545, International Association of Agricultural Economists.

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