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Buying spatially-coordinated ecosystem services: An experiment on the role of auction format and communication

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  • Krawczyk, Michał
  • Bartczak, Anna
  • Hanley, Nick
  • Stenger, Anne

Abstract

Procurement auctions are one of several policy tools available to incentivise the provision of ecosystem services and biodiversity conservation. Successful biodiversity conservation often requires a landscape-scale approach and the spatial coordination of participation, for example in the creation of wildlife corridors. In this paper, we use a laboratory experiment to explore two features of procurement auctions in a forest landscape: the pricing mechanism (uniform vs. discriminatory) and availability of communication (chat) between potential sellers. We modify the experimental design developed by Reeson et al. (2011) by introducing uncertainty (and hence heterogeneity) in the production value of forest sites as well as an automated, endogenous stopping rule. We find that discriminatory pricing yields to greater environmental benefits per government dollar spent, chiefly because it is easier to construct long corridors. Chat also facilitates such coordination but also seems to encourage collusion in sustaining high prices for the most environmentally attractive plots. These two effects offset each other, making chat neutral from the viewpoint of maximizing environmental effect per dollar spent.

Suggested Citation

  • Krawczyk, Michał & Bartczak, Anna & Hanley, Nick & Stenger, Anne, 2016. "Buying spatially-coordinated ecosystem services: An experiment on the role of auction format and communication," Ecological Economics, Elsevier, vol. 124(C), pages 36-48.
    • Handle: RePEc:eee:ecolec:v:124:y:2016:i:c:p:36-48
    DOI: 10.1016/j.ecolecon.2016.01.012
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    Cited by:

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    3. Panchalingam, Thadchaigeni & Jones Ritten, Chian & Shogren, Jason F. & Ehmke, Mariah D. & Bastian, Christopher T. & Parkhurst, Gregory M., 2019. "Adding realism to the Agglomeration Bonus: How endogenous land returns affect habitat fragmentation," Ecological Economics, Elsevier, vol. 164(C), pages 1-1.
    4. François Bareille & Matteo Zavalloni & Davide Viaggi, 2023. "Agglomeration bonus and endogenous group formation," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(1), pages 76-98, January.
    5. Smith, Gregory & Day, Brett, 2018. "Addressing the Collective Action Problem in Multiple-purchaser PES: An Experimental Investigation of Negotiated Payment Contributions," Ecological Economics, Elsevier, vol. 144(C), pages 36-58.
    6. Md Sayed Iftekhar & Uwe Latacz-Lohmann, 2017. "How well do conservation auctions perform in achieving landscape-level outcomes? A comparison of auction formats and bid selection criteria," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 61(4), pages 557-575, October.
    7. Higashida, Keisaku & Tanaka, Kenta & Managi, Shunsuke, 2019. "The efficiency of conservation banking schemes with inter-regionally tradable credits and the role of mediators," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 175-186.
    8. Justin Dijk & Erik Ansink & Daan van Soest, 2017. "Buyouts and Agglomeration Bonuses in Wildlife Corridor Auctions," Tinbergen Institute Discussion Papers 17-036/VIII, Tinbergen Institute.
    9. Nguyen, Chi & Latacz-Lohmann, Uwe, 2023. "Assessing the performance of agglomeration bonus in budget-constrained conservation auctions," 97th Annual Conference, March 27-29, 2023, Warwick University, Coventry, UK 334544, Agricultural Economics Society - AES.
    10. Ferré, Marie & Engel, Stefanie & Gsottbauer, Elisabeth, 2018. "Which Agglomeration Payment for a Sustainable Management of Organic Soils in Switzerland? – An Experiment Accounting for Farmers' Cost Heterogeneity," Ecological Economics, Elsevier, vol. 150(C), pages 24-33.
    11. Sheremet, Oleg & Ruokamo, Enni & Juutinen, Artti & Svento, Rauli & Hanley, Nick, 2018. "Incentivising Participation and Spatial Coordination in Payment for Ecosystem Service Schemes: Forest Disease Control Programs in Finland," Ecological Economics, Elsevier, vol. 152(C), pages 260-272.
    12. Liu, Zhaoyang & Banerjee, Simanti & Cason, Timothy N. & Hanley, Nick & Liu, Qi & Xu, Jintao & Kontoleon, Andreas, 2023. "Spatially Coordinated Conservation Auctions: A Framed Field Experiment Focusing on Farmland Wildlife Conservation in China," 97th Annual Conference, March 27-29, 2023, Warwick University, Coventry, UK 334572, Agricultural Economics Society - AES.
    13. Nguyen, Chi & Latacz-Lohmann, Uwe & Hanley, Nick & Schilizzi, Steven & Iftekhar, Sayed, 2022. "Spatial Coordination Incentives for landscape-scale environmental management: A systematic review," Land Use Policy, Elsevier, vol. 114(C).
    14. Simanti Banerjee & Timothy N. Cason & Frans P. de Vries & Nick Hanley, 2021. "Spatial Coordination and Joint Bidding in Conservation Auctions," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(5), pages 1013-1049.

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    More about this item

    Keywords

    Conservation auctions; Spatial coordination; Chat in experiments; Discriminatory and uniform auctions; Biodiversity conservation; Provision of ecosystem services;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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