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Applying a Voluntary Incentive Mechanism to the Problem of Groundwater Conservation: An Experimental Approach

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  • Wright, Andrew P.
  • Hudson, Darren

Abstract

This paper uses experimental methods to examine how individuals react to a set of voluntary incentives related to the conservation of a resource. The goal was to determine whether conservation over a critical area, such as a deep portion of an aquifer, could be encouraged, and whether coordination between individuals could be induced. Participants were faced with a bidding process through which units were selected for conservation, and some participants were offered an agglomeration bonus for conserving units that shared a border. Examining how bids changed across rounds revealed the existence of a learning process; implying that a similar real-world program would need to provide a large amount of information up front in order to achieve the desired effect. Using a monetary selection constraint resulted in more units placed in conservation. The bonus did not necessarily encourage conservation at the critical area, but it did reduce participant’s bid amounts.

Suggested Citation

  • Wright, Andrew P. & Hudson, Darren, 2013. "Applying a Voluntary Incentive Mechanism to the Problem of Groundwater Conservation: An Experimental Approach," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143030, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea13:143030
    DOI: 10.22004/ag.econ.143030
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    References listed on IDEAS

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    3. Smith, Rodney B. W. & Shogren, Jason F., 2002. "Voluntary Incentive Design for Endangered Species Protection," Journal of Environmental Economics and Management, Elsevier, vol. 43(2), pages 169-187, March.
    4. Feather, Peter & Hellerstein, Daniel & Hansen, LeRoy T., 1999. "Economic Valuation of Environmental Benefits and the Targeting of Conservation Programs: The Case of the CRP," Agricultural Economic Reports 34027, United States Department of Agriculture, Economic Research Service.
    5. David Zilberman, 1996. "The Economics of a Public Fund for Environmental Amenities: A Study of CRP Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 961-971.
    6. Parkhurst, Gregory M. & Shogren, Jason F. & Bastian, Chris & Kivi, Paul & Donner, Jennifer & Smith, Rodney B. W., 2002. "Agglomeration bonus: an incentive mechanism to reunite fragmented habitat for biodiversity conservation," Ecological Economics, Elsevier, vol. 41(2), pages 305-328, May.
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    Environmental Economics and Policy; Resource/Energy Economics and Policy;

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