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The Impact of Information Provision on Agglomeration Bonus Performance: An Experimental Study on Local Networks

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  • Banerjee, Simanti
  • de, Vries Frans
  • Hanley, Nicholas
  • van, Soest Daan

Abstract

The Agglomeration Bonus (AB) is a mechanism to induce adjacent landowners to spatially coordinate their land use for the delivery of ecosystem services from farmland. This paper uses laboratory experiments to explore the performance of the AB in achieving the socially optimal land management configuration in a local network environment where the information available to subjects varies. The AB poses a coordination problem between two Nash equilibria: a Pareto dominant and a risk dominant equilibrium. The experiments indicate that if subjects are informed about both their direct and indirect neighbors' actions, they are more likely to coordinate on the Pareto dominant equilibrium relative to the case where subjects have information about their direct neighbors' action only. However, the extra information can only delay - and not prevent - the transition to the socially inferior risk dominant Nash equilibrium. In the long run, the AB mechanism may only be partially effective in enhancing delivery of ecosystem services on farming landscapes featuring local networks.

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  • Banerjee, Simanti & de, Vries Frans & Hanley, Nicholas & van, Soest Daan, 2013. "The Impact of Information Provision on Agglomeration Bonus Performance: An Experimental Study on Local Networks," Stirling Economics Discussion Papers 2013-09, University of Stirling, Division of Economics.
  • Handle: RePEc:stl:stledp:2013-09
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    File URL: http://hdl.handle.net/1893/16484
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    Cited by:

    1. Frans P. Vries & Nick Hanley, 2016. "Incentive-Based Policy Design for Pollution Control and Biodiversity Conservation: A Review," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(4), pages 687-702, April.
    2. Banerjee, Simanti & Shortle, James S., 2015. "Informal low-cost methods for increasing enrollment of environmentally sensitive lands in farmland conservation programs: An experimental study," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205126, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    3. Benjamin Ouvrard & Sandrine Spaeter, 2016. "Environmental Incentives: Nudge or Tax?," Working Papers of BETA 2016-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Gregory M. Parkhurst & Jason F. Shogren & Thomas Crocker, 2016. "Tradable Set-Aside Requirements (TSARs): Conserving Spatially Dependent Environmental Amenities," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 63(4), pages 719-744, April.
    5. repec:eee:jeeman:v:83:y:2017:i:c:p:68-89 is not listed on IDEAS
    6. Laure Kuhfuss & Raphaële Préget & Sophie Thoyer & Nick Hanley, 2015. "Nudging farmers to sign agri-environmental contracts: the effects of a collective bonus," Discussion Papers in Environment and Development Economics 2015-06, University of St. Andrews, School of Geography and Sustainable Development.
    7. Laure Kuhfuss & Raphaële Préget & Sophie Thoyer & Frans P. de Vries & Nick Hanley, 2017. "Nudging Participation and Spatial Agglomeration in Payment for Environmental Service Schemes," Discussion Papers in Environment and Development Economics 2017-11, University of St. Andrews, School of Geography and Sustainable Development.
    8. Benjamin Ouvrard & Sandrine Spaeter, 2016. "Environmental Incentives: Nudge or Tax?," Working Papers 2016.15, FAERE - French Association of Environmental and Resource Economists.
    9. Matteo Zavalloni & Meri Raggi & Davide Viaggi, 2016. "Assessing Collective Measures in Rural Policy: The Effect of Minimum Participation Rules on the Distribution of Benefits from Irrigation Infrastructure," Sustainability, MDPI, Open Access Journal, vol. 9(1), pages 1-19, December.
    10. Krawczyk, Michał & Bartczak, Anna & Hanley, Nick & Stenger, Anne, 2016. "Buying spatially-coordinated ecosystem services: An experiment on the role of auction format and communication," Ecological Economics, Elsevier, vol. 124(C), pages 36-48.
    11. repec:eee:ecolec:v:144:y:2018:i:c:p:36-58 is not listed on IDEAS
    12. Simanti Banerjee & Timothy N. Cason & Frans P. de Vries & Nick Hanley, 2015. "Spatial Coordination in Agglomeration Bonus Schemes with Transaction Costs and Communication: An Experimental Study," Discussion Papers in Environment and Development Economics 2015-10, University of St. Andrews, School of Geography and Sustainable Development.
    13. Cooke, Benjamin & Moon, Katie, 2015. "Aligning ‘public good’ environmental stewardship with the landscape-scale: Adapting MBIs for private land conservation policy," Ecological Economics, Elsevier, vol. 114(C), pages 152-158.
    14. Oleg Sheremet & Enni Ruokamo & Artti Juutinen & Rauli Svento & Nick Hanley, 2017. "Incentivising Participation and Spatial Coordination in Payment for Ecosystem Service Schemes:Forest Disease Control Programs in Finland," Discussion Papers in Environment and Development Economics 2017-13, University of St. Andrews, School of Geography and Sustainable Development.
    15. repec:gam:jlands:v:6:y:2017:i:3:p:57-:d:109574 is not listed on IDEAS

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    Keywords

    Agglomeration bonus; agri-environment schemes; biodiversity conservation; ecosystem services; information spillovers; Payments for Ecosystem Services; spatial coordination;

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