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

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

Abstract

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.

Suggested Citation

  • Banerjee, Simanti & Kwasnica, Anthony M & Shortle, James S, 2011. "Agglomeration Bonus in Local Networks: A laboratory examination of spatial coordination failure," Stirling Economics Discussion Papers 2011-18, University of Stirling, Division of Economics.
  • Handle: RePEc:stl:stledp:2011-18
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    File URL: http://hdl.handle.net/1893/3477
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    References listed on IDEAS

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    Cited by:

    1. Elizabeth A. Wilman, 2013. "Instruments for Forest Habitat Connectivity," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 6(1), January.
    2. Simanti Banerjee & Frans P. de Vries & Nick Hanley & Daan P. van Soest, 2014. "The Impact of Information Provision on Agglomeration Bonus Performance: An Experimental Study on Local Networks," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(4), pages 1009-1029.
    3. Ferré, Marie & Engel, Stefanie & Gsottbauer, Elisabeth, 2018. "Which Agglomeration Payment for a Sustainable Management of Organic Soils in Switzerland? – An Experiment Accounting for Farmers' Cost Heterogeneity," Ecological Economics, Elsevier, vol. 150(C), pages 24-33.

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    Keywords

    Agglomeration Bonus; coordination failure; local networks; experiments;
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