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Options for Improving Conservation Programs: Insights From Auction Theory and Economic Experiments

Author

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  • Hellerstein, Daniel
  • Higgins, Nathaniel
  • Roberts, Michael

Abstract

The U.S. Department of Agriculture spends over $5 billion per year on conservation programs, mostly on voluntary programs that give financial assistance to farmers and landowners to provide environmental services (such as implementing nutrient management programs or planting native grasses). Since most programs cannot fund all interested parties, program managers must use some mechanism to select applicants. One option is to elicit offers through an auction. This report addresses the use of auctions in conservation programs. It considers how information in the hands of Government officials and rural landowners affects the auction’s performance, and how auction design can reduce Government expenditures or encourage landowners to provide greater environmental services. Results of laboratory experiments are discussed, highlighting shortcomings of common features of conservation program auctions (such as limits on the rent landowners may request), as well as how alternative auction designs can improve performance.
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Suggested Citation

  • Hellerstein, Daniel & Higgins, Nathaniel & Roberts, Michael, 2015. "Options for Improving Conservation Programs: Insights From Auction Theory and Economic Experiments," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, issue 01, pages 1-1, February.
  • Handle: RePEc:ags:uersaw:209897
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    References listed on IDEAS

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    1. Steven Schilizzi & Uwe Latacz-Lohmann, 2007. "Assessing the Performance of Conservation Auctions: An Experimental Study," Land Economics, University of Wisconsin Press, vol. 83(4), pages 497-515.
    2. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer.
    3. Emel Filiz-Ozbay & Erkut Y. Ozbay, 2007. "Auctions with Anticipated Regret: Theory and Experiment," American Economic Review, American Economic Association, vol. 97(4), pages 1407-1418, September.
    4. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521551847, June.
    5. Michael H. Rothkopf, 1969. "A Model of Rational Competitive Bidding," Management Science, INFORMS, vol. 15(7), pages 362-373, March.
    6. Harry J. Paarsch & Han Hong, 2006. "An Introduction to the Structural Econometrics of Auction Data," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262162350, October.
    7. Loretta J. Mester, 1995. "There's more than one way to sell a security: the Treasury's auction experiment," Business Review, Federal Reserve Bank of Philadelphia, issue Jul, pages 3-17.
    8. Schilizzi, Steven & Latacz-Lohmann, Uwe, 2007. "Assessing the performance of conservation auctions: an experimental study," 2007 Conference (51st), February 13-16, 2007, Queenstown, New Zealand 10436, Australian Agricultural and Resource Economics Society.
    9. Jason F. Shogren, 2004. "Incentive Mechanism Testbeds: Discussion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1218-1219.
    10. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-955, December.
    11. Smith, Vernon L, 1976. "Experimental Economics: Induced Value Theory," American Economic Review, American Economic Association, vol. 66(2), pages 274-279, May.
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    Cited by:

    1. repec:eee:ecoser:v:26:y:2017:i:pa:p:98-110 is not listed on IDEAS
    2. Banerjee, Simanti & Conte, Marc N., 2017. "Balancing Complexity and Rent-Seeking in Multi-Attribute Conservation Procurement Auctions: Evidence from a Laboratory Experiment," 2018 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2018, Philadelphia, Pennsylvania 266293, Agricultural and Applied Economics Association.
    3. Ben Ayara, Amine & Cho, Seong-Hoon & Clark, Christopher & Lambert, Dayton & Armsworth, Paul, 2016. "Spatial and Temporal Variation in the Optimal Provision of Forest-based Carbon Storage," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236005, Agricultural and Applied Economics Association.
    4. repec:eee:ecolec:v:146:y:2018:i:c:p:17-25 is not listed on IDEAS
    5. Janusch, Nicholas & Palm-Forster, Leah H. & Messer, Kent D. & Ferraro, Paul J., 2017. "Behavioral Insights for Agri-Environmental Program and Policy Design," 2018 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2018, Philadelphia, Pennsylvania 266299, Agricultural and Applied Economics Association.

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