Auctions for conservation contracts: an empirical examination of Victoria’s BushTender trial
The present paper proposes that markets for nature conservation on private land are missing because of the problem of asymmetric information. An auction of conservation contracts was designed to reveal hidden information needed to facilitate meaningful transactions between landholders and government. The present paper describes the key elements of auction and contract design employed and the results obtained from a pilot auction of conservation contracts run in two regions of Victoria. The pilot demonstrated that it was possible to create at least the supply side of a market for nature conservation and in conjunction with a defined budget, prices were discovered and resources allocated through contracts with landholders. The present paper compares a discriminative price auction with a hypothetical fixed-price scheme showing that an auction could offer large cost savings to governments interested in nature conservation on private land. The paper identifies some important design problems that would need to be solved before auctions could be applied more broadly including: multiple complementary outcomes, reserve prices, sequential auction design and contract design. Nevertheless, the paper does show that auctioning conservation contracts for environmental outcomes is an important new policy mechanism that deserves closer examination.
Volume (Year): 47 (2003)
Issue (Month): 4 (December)
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- 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.
- Elmar WOLFSTETTER, 1994.
"Auctions: An Introduction,"
SFB 373 Discussion Papers
1994,13, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- 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.
- 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.
- McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
- Cooper, Joseph C., 1997. "Combining Actual And Contingent Behavior Data To Model Farmer Adoption Of Water Quality Protection Practices," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(01), July.
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