Providing Multiple Units of a Public Good Using Individualized Price Auctions: Experimental Evidence

Integrating Watershed Hydrology and Economics to Establish a Local Market for Water Quality Improvement: A Field Experiment

“…willingness to donate in relation to the marginal unit(s) being provided, enabling individuals to name a lower per-unit donation as more units are provided, thereby creating an opportunity for buyers to generate additional surplus as the number of units provided increases (see Swallow (2013) for a more extensive description). Liu and Swallow (2014) provide evidence from a laboratory experiment that the IPA generates higher contributions than a request to name and donate a fixed amount to each unit or task. The IPA approach elicits marginal, per unit offers from individuals asked to consider the quantity of P reduction available within a pre-defined task (defined below in Table 1); the IPA determines the outcome of an auction as the quantity of a public good where the sum of marginal per-unit offers from individuals equals or exceeds the marginal cost of delivering a unit.…”

Ecosystem Services Auctions: The Last Decade of Research

“…While these mechanisms employ the auction lexicon, they derive from provision point mechanisms and subscription games. This article focuses on two such mechanisms: ECOSEL [40] and individual price auctions (IPA) [41].…”

“…For a general introduction to IPAs, see Swallow [75] and Smith and Swallow [39] (these sources explore applications of Lindahl's [76] framework; for more on Lindahl pricing, see [77][78][79]). Individuals successively bid their marginal WTP for additional units of a public good; the principal checks if the aggregate bids for unit n meet n's provision point; if so, the principal moves to n + 1, etc., until the provision point is not met for some unit and the remaining bids are refunded (see Liu and Swallow [41] for different market-clearing rules.) All bidders may pay different prices for the same provision, but none more than they bid.…”

“…Where monitoring is infeasible, success may hinge on non-economic factors like mutual trust [104] (see Trust in Section 3.5.3). In the US, the Bobolink Project considered bidirectional conditionality: as in a standard IPA, acceptance of buyers' contributions was conditional on habitat procurement level (see e.g., [41]), while sellers' payments were conditional on compliance with a process-based standard [67].…”

“…Equity discussions are often couched in terms of participants' expectations rather than researchers' ethics (e.g., [107]). There are practical reasons for ensuring that stakeholders perceive allocation and price-setting processes as fair and transparent [38,41,64,82] (see Sections 3.5.3 and 3.6). "Incorporating justice into conservation" is pragmatic, since interventions perceived to be just are more likely to succeed [83] (p. 45).…”