IDEAS home Printed from https://ideas.repec.org/a/bla/jageco/v49y1998i3p334-345.html
   My bibliography  Save this article

Auctions as a Means of Creating a Market for Public Goods from Agriculture

Author

Listed:
  • Uwe Latacz‐Lohmann
  • Carel P. C. M. Van der Hamsvoort

Abstract

The paper looks at the possibility of creating a market for environmental goods and services in the countryside by awarding conservation contracts to farmers on the basis of competitive bidding. Auctions have several theoretical advantages over alternative allocation mechanisms (such as standard‐rate payments) because they allow the participants to deal with informational asymmetries and the uncertainty about the value of the (non‐market) goods being traded. A formal model of bidding behaviour in ‘green auctions’ shows that bidding strategies are determined by the individual farmers' costs of implementing the conservation contracts and their beliefs about the maximum acceptable payment level, making the auction an imperfect cost revelation mechanism. Auctions can reduce the information rents accruing to farmers and can increase the cost‐effectiveness of public goods provision. Strategic bidding behaviour in multiple‐signup auctions as well as high transaction costs are potential sources of reduced efficiency.

Suggested Citation

  • Uwe Latacz‐Lohmann & Carel P. C. M. Van der 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, September.
    • Handle: RePEc:bla:jageco:v:49:y:1998:i:3:p:334-345
    DOI: 10.1111/j.1477-9552.1998.tb01276.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1477-9552.1998.tb01276.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1477-9552.1998.tb01276.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Katherine Reichelderfer & William G. Boggess, 1988. "Government Decision Making and Program Performance: The Case of the Conservation Reserve Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(1), pages 1-11.
    2. Robbin Shoemaker, 1989. "Agricultural Land Values and Rents under the Conservation Reserve Program," Land Economics, University of Wisconsin Press, vol. 65(2), pages 131-137.
    3. Michael H. Rothkopf & Ronald M. Harstad, 1994. "Modeling Competitive Bidding: A Critical Essay," Management Science, INFORMS, vol. 40(3), pages 364-384, March.
    4. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer.
    5. McAfee, R Preston & McMillan, John, 1987. "Auctions and Bidding," Journal of Economic Literature, American Economic Association, vol. 25(2), pages 699-738, June.
    6. Holt, Charles A, Jr, 1980. "Competitive Bidding for Contracts under Alternative Auction Procedures," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 433-445, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Schilizzi, Steven & Latacz-Lohmann, Uwe, 2009. "Predicting the performance of conservation tenders when information on bidders's costs is limited," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 48171, Australian Agricultural and Resource Economics Society.
    2. Vergamini, Daniele & Viaggi, Davide & Raggi, Meri, 2016. "Agri-environmental measures and farmers’ rent: evaluating the potential contribution of auctions to increase the efficiency of Agri-environmental schemes in Emilia-Romagna (Italy)," 2016 Fifth AIEAA Congress, June 16-17, 2016, Bologna, Italy 242443, Italian Association of Agricultural and Applied Economics (AIEAA).
    3. Scheufele, Gabriela & Bennett, Jeff, 2017. "Can payments for ecosystem services schemes mimic markets?," Ecosystem Services, Elsevier, vol. 23(C), pages 30-37.
    4. William W. Wilson & Bruce L. Dahl, 2004. "Transparency and Bidding Competition in International Wheat Trade," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 52(1), pages 89-105, March.
    5. Ravi Bapna & Paulo Goes & Alok Gupta, 2003. "Analysis and Design of Business-to-Consumer Online Auctions," Management Science, INFORMS, vol. 49(1), pages 85-101, January.
    6. Vincent P. Crawford & Nagore Iriberri, 2007. "Level-k Auctions: Can a Nonequilibrium Model of Strategic Thinking Explain the Winner's Curse and Overbidding in Private-Value Auctions?," Econometrica, Econometric Society, vol. 75(6), pages 1721-1770, November.
    7. Cramton, Peter C, 1995. "Money Out of Thin Air: The Nationwide Narrowband PCS Auction," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 267-343, Summer.
    8. Crawford, Vincent P. & Kuo, Ping-Sing, 2003. "A dual Dutch auction in Taipei: the choice of numeraire and auction form in multi-object auctions with bundling," Journal of Economic Behavior & Organization, Elsevier, vol. 51(4), pages 427-442, August.
    9. Jarl G. Kallberg & Crocker H. Liu & Adam Nowak, 2021. "An Empirical Analysis of Double Round Auctions," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 531-555, June.
    10. Walley, Matthew J.C. & Fortin, David R., 2005. "Behavioral outcomes from online auctions: reserve price, reserve disclosure, and initial bidding influences in the decision process," Journal of Business Research, Elsevier, vol. 58(10), pages 1409-1418, October.
    11. Jeffery D. Connor & John R. Ward & Brett Bryan, 2008. "Exploring the cost effectiveness of land conservation auctions and payment policies ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(3), pages 303-319, September.
    12. Wilson, William W. & Diersen, Matthew A., 2001. "Competitive Bidding On Import Tenders: The Case Of Minor Oilseeds," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(1), pages 1-16, July.
    13. J. Reiß & Jens Schöndube, 2010. "First-price equilibrium and revenue equivalence in a sequential procurement auction model," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 43(1), pages 99-141, April.
    14. Urs Meister, 2004. "Franchise Bidding in the Water Industry – Auction Schemes and Investment Incentives," Public Economics 0412011, University Library of Munich, Germany.
    15. Rousseau Sandra & Moons Ellen, "undated". "Auctioning Conservation Contracts: An Application to the Flemish Afforestation Policy," Energy, Transport and Environment Working Papers Series ete0606, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
    16. Kozloff, Keith & Taff, Steven J., 1990. "Perspectives On Competitive Bidding: Retirement Of Environmentally Sensitive Farmland," Staff Papers 13822, University of Minnesota, Department of Applied Economics.
    17. Gustavo Vulcano & Garrett van Ryzin & Costis Maglaras, 2002. "Optimal Dynamic Auctions for Revenue Management," Management Science, INFORMS, vol. 48(11), pages 1388-1407, November.
    18. Connor, Jeffery D. & Ward, John R. & Bryan, Brett, 2008. "Exploring the cost effectiveness of land conservation auctions and payment policies," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(3), pages 1-17.
    19. Robert J. Kauffman & Salvatore T. March & Charles A. Wood, 2000. "Design principles for long‐lived Internet agents," Intelligent Systems in Accounting, Finance and Management, John Wiley & Sons, Ltd., vol. 9(4), pages 217-236, December.
    20. Lorentziadis, Panos L., 2016. "Optimal bidding in auctions from a game theory perspective," European Journal of Operational Research, Elsevier, vol. 248(2), pages 347-371.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jageco:v:49:y:1998:i:3:p:334-345. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0021-857X .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.