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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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    References listed on IDEAS

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    Cited by:

    1. repec:eee:ecolec:v:152:y:2018:i:c:p:260-272 is not listed on IDEAS
    2. repec:eee:ecoser:v:34:y:2018:i:pb:p:201-205 is not listed on IDEAS
    3. 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.
    4. repec:eee:ecolec:v:144:y:2018:i:c:p:36-58 is not listed on IDEAS
    5. repec:eee:ecanpo:v:62:y:2019:i:c:p:175-186 is not listed on IDEAS
    6. 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.
    7. repec:eee:ecolec:v:150:y:2018:i:c:p:24-33 is not listed on IDEAS

    More about this item

    Keywords

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

    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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