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The Efficiency of Direct Public Involvement in Environmental Policymaking: An Experimental Test

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In one of the most ambitious forms of environmental decision-making, representatives of interested parties – environmentalists, developers, farmers, loggers, miners, etc. - are charged with the responsibility of developing a set of public policies that is acceptable to all of them. Although this approach has become increasingly popular, and has been widely discussed in the academic literature, little is known about the characteristics of the outcomes that are reached in this type of negotiation. We do not know, for example, whether these outcomes meet the standard criteria for efficiency or equity. In this paper, we use laboratory experiments to test whether a number of axiomatic models of bargaining can predict the behavior of the parties to environmental decision making. In recognition of the multi-dimensional aspect of most public land use conflicts, we ask pairs of subjects to negotiate over two goods, without the possibility of cash side payments. We thus provide one of the first experimental tests of a prediction associated with the Edgeworth Box: that parties with an initial endowment that is Pareto inefficient will make trades until they reach a Pareto efficient allocation. We further test whether parties in particular reach the Nash bargain when it coincides with or conflicts with outcomes that maximise the parties’ joint payoffs and with outcomes at which the parties’ receive equal payoffs. Finally, the effect of providing parties with full or partial information regarding payoffs is also examined.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0808.pdf
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Bibliographic Info

Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 08/08.

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Length: 35 pages
Date of creation: 05 May 2008
Date of revision:
Handle: RePEc:cbt:econwp:08/08

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Keywords: Axiomatic models of bargaining; Experimental tests; Land use conflicts; Collaborative policymaking;

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  1. Harrison, Glenn W & McKee, Michael, 1985. "Experimental Evaluation of the Coase Theorem," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 653-70, October.
  2. Jeremy Clark, 1998. "Fairness in Public Good Provision: An Investigation of Preferences for Equality and Proportionality," Canadian Journal of Economics, Canadian Economics Association, vol. 31(3), pages 708-729, August.
  3. Harsanyi,John C., 1986. "Rational Behaviour and Bargaining Equilibrium in Games and Social Situations," Cambridge Books, Cambridge University Press, number 9780521311830, October.
  4. Roth, Alvin E. & Malouf, Michael W. K. & Murnighan, J. Keith, 1981. "Sociological versus strategic factors in bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 2(2), pages 153-177, June.
  5. Ashenfelter, Orley & Johnson, George E, 1969. "Bargaining Theory, Trade Unions, and Industrial Strike Activity," American Economic Review, American Economic Association, vol. 59(1), pages 35-49, March.
  6. Roth, Alvin E & Schoumaker, Francoise, 1983. "Expectations and Reputations in Bargaining: An Experimental Study," American Economic Review, American Economic Association, vol. 73(3), pages 362-72, June.
  7. Bruce, Christopher, 2006. "Modeling the environmental collaboration process: A deductive approach," Ecological Economics, Elsevier, vol. 59(3), pages 275-286, September.
  8. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
  9. Hoffman, Elizabeth & Spitzer, Matthew L, 1982. "The Coase Theorem: Some Experimental Tests," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 73-98, April.
  10. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  11. Murnigham, J.K. & Roth, A.E. & Schoumaker, F., 1985. "Risk Aversion in Bargaining: an Experimental Study," Cahiers de recherche 8536, Universite de Montreal, Departement de sciences economiques.
  12. Rhoads, Thomas A & Shogren, Jason F, 2003. "Regulation through Collaboration: Final Authority and Information Symmetry in Environmental Coasean Bargaining," Journal of Regulatory Economics, Springer, vol. 24(1), pages 63-89, July.
  13. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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Cited by:
  1. repec:clg:wpaper:2009-18 is not listed on IDEAS
  2. Christopher Bruce, 2012. "The Use of Collaborative Bargaining in Agricultural Policy-Making," Working Papers 2012-04, Department of Economics, University of Calgary.

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