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Testing and Implementing the Use of Multiple Bidding Rounds in Conservation Auctions: A Case Study Application

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  • John Rolfe
  • Jill Windle
  • Juliana McCosker

Abstract

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.” Where landholders are unfamiliar with conservation tender processes and the supply of environmental services, they may find it very difficult to construct bids in this way. Bid values may 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 bidding round auction for landholder management actions are explored with the use of field experiments and a conservation auction. The case study application is improved grazing management in a rangeland area of Australia, where landholders are unfamiliar with supplying environmental services or conservation auctions. Results suggest that multiple round auctions may be associated with efficiency gains, particularly in initial rounds. Les enchères pour la conservation sont généralement des enchères au premier prix, à un tour, discriminatoires et par offre écrite. Elles reposent sur l’hypothèque que les offres des propriétaires fonciers refléteront leur ≪valeur privée≫. Lorsque les propriétaires fonciers ne sont pas familiers avec les processus d’enchères pour la conservation et la prestation de services environnementaux, ils peuvent éprouver de la difficultéà attribuer une valeur à leur offre. Cette valeur peut‐être influencée par d’autres facteurs, tels que la crainte de la ≪malédiction du vainqueur ≫, le désir de réaliser une rente économique, les primes de risque et les facteurs d’incertitude. Les enchères scellées à un tour peuvent aggraver le manque d’information et les facteurs d’incertitude étant donné que les enchérisseurs disposent de peu d’information comparativement aux enchères ascendantes ouvertes traditionnelles. Dans le présent article, nous avons examiné, à l’aide d’expériences sur le terrain et d’enchères pour la conservation, l’efficacité‐coût d’une enchère à tours multiples pour des mesures de gestion de la part de propriétaires fonciers. L’exercice visait à améliorer la gestion des pâturages d’un parcours naturel en Australie, où les propriétaires fonciers ne sont pas familiers avec la prestation de services environnementaux ni avec les enchères pour la conservation. Les résultats autorisent à penser que les enchères à tours multiples pourraient offrir des gains d’efficience, particulièrement durant les premiers tours.

Suggested Citation

  • John Rolfe & Jill Windle & Juliana McCosker, 2009. "Testing and Implementing the Use of Multiple Bidding Rounds in Conservation Auctions: A Case Study Application," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 57(3), pages 287-303, September.
  • Handle: RePEc:bla:canjag:v:57:y:2009:i:3:p:287-303
    DOI: 10.1111/j.1744-7976.2009.01152.x
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    References listed on IDEAS

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