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Measuring the Cost-effectiveness of Conservation Auctions Relative to Alternate Policy Mechanisms

  • White, Benedict
  • Burton, Michael P.

The principle motivation for using price-discriminating conservation auctions is that they are expected to be significantly more cost-effective than fixed-price mechanisms. This paper measures cost effectiveness for tenders from two rounds of the Auction for Landscape Recovery in Western Australia relative to counterfactual fixed-price mechanisms. If we assume that the bid equals the compliance cost, the auction gives a significant cost saving over fixed-price mechanisms. If instead we assume that bids include an element of rent, fixed-price mechanisms can be more cost effective than the auction. The significance of these results is that a fixed price scheme may achieve a similar level of cost effectiveness to a conservation auction, when one or more of the following apply: compliance costs do not vary significantly between producers, auction bids have a significant element of rent and the auction incurs a significant additional administrative cost.

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Paper provided by University of Western Australia, School of Agricultural and Resource Economics in its series Working Papers with number 97798.

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Date of creation: 13 Dec 2010
Date of revision:
Handle: RePEc:ags:uwauwp:97798
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