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Evaluating the Potential Contribution of Multi-Attribute Auctions to Achieve Agri-Environmental Targets and Efficient Payment Design

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  • Vergamini, Daniele
  • Viaggi, Davide
  • Raggi, Meri

Abstract

This paper analyses the performance of a multi-attribute auction for securing agri-environmental outcomes and cost-effective agri-environmental payments (AEPs). We set up a discriminatory price auction model in which farmers make an offer based on two attributes (i.e. the AEP and a proxy of environmental outcome). We provide a numerical simulation for a hypothetical agri-environmental scheme (AES) in Italy using FADN data 2011 for the Emilia-Romagna region (E-R). In three implementation scenarios, we compare the Budgetary cost-effectiveness (BCE), the Economic cost-effectiveness (ECE) and Information rent (IR) of the auction with that of two alternative policy instruments (i.e. uniform payment and marginal flat rate payment). Due to the heterogeneity in bidders' opportunity costs, the auction is more cost-effective than a uniform payment in delivering the target outcome. The performance indicators are sensitive to the farmers' expectations about the bid caps, revealing the opportunity of using both competition effect and information leverage associated with the implementation mechanism to increase the auction outcome when the budget is limited.

Suggested Citation

  • Vergamini, Daniele & Viaggi, Davide & Raggi, Meri, 2020. "Evaluating the Potential Contribution of Multi-Attribute Auctions to Achieve Agri-Environmental Targets and Efficient Payment Design," Ecological Economics, Elsevier, vol. 176(C).
    • Handle: RePEc:eee:ecolec:v:176:y:2020:i:c:s0921800918301150
    DOI: 10.1016/j.ecolecon.2020.106756
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    More about this item

    Keywords

    Agri-environmental policy; Multi-attribute auction; Compensation payments; Information asymmetry; Adverse selection;
    All these keywords.

    JEL classification:

    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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