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Agglomeration Bonus in Local Networks: A laboratory examination of spatial coordination failure

  • Banerjee, Simanti
  • Kwasnica, Anthony M
  • Shortle, James S

The Agglomeration Bonus (AB) - a subsidy mechanism can incentivize neighboring landowners to spatially coordinate their land use decisions for effective provision of ecosystem services such as biodiversity protection. In this paper we explore individual AB performance on a local network in a laboratory setting. In our experiments, we vary the local network size while keeping the number of neighbors for each player same. Results suggest better AB performance and greater spatial coordination in smaller groups relative to bigger ones. In bigger groups however we observe localized areas of coordinated land use choices which indicate partial AB effectiveness.

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File URL: http://hdl.handle.net/1893/3477
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Paper provided by University of Stirling, Division of Economics in its series Stirling Economics Discussion Papers with number 2011-18.

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Date of creation: Nov 2011
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Handle: RePEc:stl:stledp:2011-18
Contact details of provider: Postal: Division of Economics, University of Stirling, Stirling, Scotland FK9 4LA
Phone: +44 (0)1786 467473
Fax: +44 (0)1786 467469
Web page: http://www.econ.stir.ac.uk/

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