IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

An assessment of four popular auction mechanisms in the siting of NIMBY facilities: some experimental evidence

Listed author(s):
  • Euston Quah
  • Jongsay Yong

The issue of locating locally unfriendly but socially beneficial facilities such as landfills and power stations is an important public policy concern in many countries. Local residents in the area where such facilities are to be located tend to exhibit strong opposition, no doubt due to the asymmetric distribution of the costs and benefits of such not-in-my-backyard (NIMBY) facilities. A potentially useful mechanism for the siting of such facilities is by compensation auctions, which attempt to incorporate the market mechanism into the decision making process. In such auctions, communities name the compensation they require to host such facilities, and the community demanding the least amount of compensation gets to host the facility. This research attempts to evaluate the performance of such compensation auctions using laboratory exepriments. Four popular auction formats are evaluated: first- and second-price and all-pay first-and second-price sealed-bid auctions. The latter two formats correspond to the compensation auctions with penalty payments proposed by Kunreuther and Kleindorfer (1986) and Quah and Tan (1998), who claim that these auctions are more efficient as they restrains strategic (or over) bidding. Our results, however, contradict this claim. We show that the first-and second-price auctions without penalty payments are in fact more efficient, in that they tend to minimize social costs, and truthful bidding is more likely.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 40 (2008)
Issue (Month): 7 ()
Pages: 841-852

in new window

Handle: RePEc:taf:applec:v:40:y:2008:i:7:p:841-852
DOI: 10.1080/00036840600758509
Contact details of provider: Web page:

Order Information: Web:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:40:y:2008:i:7:p:841-852. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.