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Auction Design for the Private Provision of Public Goods in Developing Countries: Lessons from Payments for Environmental Services in Malawi and Indonesia

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  • Ajayi, Oluyede C.
  • Jack, B. Kelsey
  • Leimona, Beria

Abstract

Payments for environmental services programs use direct incentives to improve the environmental impacts of private land use decisions. An auction offers an approach to efficiently allocating contracts among least-cost landholders, which can improve the overall cost-effectiveness of the approach. However, experiences with auctions in developing country settings are limited. We compare the results of two case studies that use auctions to allocate payments for environmental service contracts in Indonesia and Malawi. While the settings and the contracts differ, regularities in auction design allow comparisons and general lessons about the application of auctions to payments for environmental services programs.

Suggested Citation

  • Ajayi, Oluyede C. & Jack, B. Kelsey & Leimona, Beria, 2012. "Auction Design for the Private Provision of Public Goods in Developing Countries: Lessons from Payments for Environmental Services in Malawi and Indonesia," World Development, Elsevier, vol. 40(6), pages 1213-1223.
  • Handle: RePEc:eee:wdevel:v:40:y:2012:i:6:p:1213-1223
    DOI: 10.1016/j.worlddev.2011.12.007
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    References listed on IDEAS

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    3. repec:eee:ecoser:v:25:y:2017:i:c:p:44-55 is not listed on IDEAS
    4. Van Hecken, Gert & Bastiaensen, Johan & Windey, Catherine, 2015. "The frontiers of the debate on Payments for Ecosystem Services: a proposal for innovative future research," IOB Discussion Papers 2015.05, Universiteit Antwerpen, Institute of Development Policy (IOB).
    5. Smith, Helen F. & Sullivan, Caroline A., 2014. "Ecosystem services within agricultural landscapes—Farmers' perceptions," Ecological Economics, Elsevier, vol. 98(C), pages 72-80.
    6. Skidmore, Samuel & Santos, Paulo & Leimona, Beria, 2014. "Targeting REDD+: An Empirical Analysis of Carbon Sequestration in Indonesia," World Development, Elsevier, vol. 64(C), pages 781-790.
    7. Anna Bartczak & Michał Krawczyk & Nick Hanley & Anne Stenger, 2014. "Buying spatially-coordinated ecosystem services and biodiversity conservation on forest land: an experiment on the role of auction format and communication," Working Papers 2014-19, Faculty of Economic Sciences, University of Warsaw.
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    9. Hairat, Manish Kumar & Ghosh, Sajal, 2017. "100GW solar power in India by 2022 – A critical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 73(C), pages 1041-1050.
    10. Vieira, Wilson da Cruz, 2015. "Auctioning off Prizes for Agricultural Product Flow under a Policy of Minimum Prices," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 69(4), December.
    11. Van Hecken, Gert & Bastiaensen, Johan & Windey, Catherine, 2015. "Towards a power-sensitive and socially-informed analysis of payments for ecosystem services (PES): Addressing the gaps in the current debate," Ecological Economics, Elsevier, vol. 120(C), pages 117-125.
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    14. Mayr, Dieter & Schmidt, Johannes & Schmid, Erwin, 2014. "The potentials of a reverse auction in allocating subsidies for cost-effective roof-top photovoltaic system deployment," Energy Policy, Elsevier, vol. 69(C), pages 555-565.
    15. Alix-Garcia, Jennifer & Wolff, Hendrik, 2014. "Payment for Ecosystem Services from Forests," IZA Discussion Papers 8179, Institute for the Study of Labor (IZA).
    16. B. Kelsey Jack, 2013. "Private Information and the Allocation of Land Use Subsidies in Malawi," American Economic Journal: Applied Economics, American Economic Association, vol. 5(3), pages 113-135, July.

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