Spatial Coordination and Joint Bidding in Conservation Auctions

Abstract

Spatial coordination of land use change is pivotal in agri-environmental policy to improve the delivery of environmental goods. This paper implements a laboratory experiment to study spatial coordination in a conservation auction. In addition to letting individual producers bid competitively against each other to supply environmental goods, we ask whether opportunities for joint bidding can enhance spatial coordination in the auction cost-effectively. Auction performance depends on the nature of incentives for individual bids; in particular, whether an agglomeration bonus is offered for individual bids. With an individual bonus in place, joint bidding gives no improvement in either environmental benefits procured or cost-effectiveness. Absent an individual bonus, joint bidding improves environmental performance but can decrease cost-effectiveness. Further, across both individual and joint bidding treatments, the average environmental benefits, degree of spatial coordination and cost-effectiveness is greater, and amount of seller markups lower, with multi-round bidding compared to single round bidding. The authors are grateful to the Marine Alliance for Science and Technology for Scotland (MASTS) pooling initiative for financial support. MASTS is funded by the Scottish Funding Council (grant reference HR09011) and contributing institutions. We thank James Keeler and Town Oh for excellent research assistance. For valuable comments we thank three anonymous referees, the editor (Christian Vossler), Ben Balmford,

The costs of delivering environmental outcomes with land sharing and land sparing

“…In particular, our combined total did not include the costs of monitoring schemes to assess intervention effectiveness. This is challenging because existing studies have not sought to compare the costs of monitoring the effectiveness of et al, 2016); however, such an analysis would also have to consider the financial incentives needed to encourage spatial coordination (Banerjee et al, 2021;Liu et al, 2019). Finally, some stakeholders might only be interested in either delivering biodiversity or carbon emission outcomes (which here we have presented together).…”

Agglomeration bonus and endogenous group formation

“…The literature has focused on the assessment of the cost effectiveness of AB schemes (in terms of conservation outcomes for a given level of public expenditures) 1 either using lab experiments (Banerjee et al, 2017(Banerjee et al, , 2021Fooks et al, 2016;Krawczyk et al, 2016;Parkhurst et al, 2002Parkhurst et al, , 2016Parkhurst & Shogren, 2007;Reeling et al, 2018), field experiments (Liu et al, 2019;Panchalingam et al, 2019), theoretical noncooperative game models (Albers et al, 2008;Arora et al, 2021), or spatially explicit ecological-economic models (Bamière et al, 2013;Bell et al, 2016;Drechsler, 2017aDrechsler, , 2017bDrechsler et al, 2010Drechsler et al, , 2016Wätzold & Drechsler, 2014). These studies find that AB schemes are more costeffective than traditional spatially homogeneous payments or auction mechanisms.…”

Farmers’ Preferences for Agri-Environmental Incentive Programs, Learning from Experiences in Ontario

“…Research on conservation auctions tested agglomeration bonuses (Parkhurst et al, 2002;Parkhurst & Shogren, 2007;etc. ), spatial-connection incentives (Banerjee et al, 2015;Fooks et al, 2016;Krawczyk et al, 2016;Liu et al, 2019;Windle et al, 2009); and joint bidding (Banerjee et al, 2021;Calel, 2012;Iftekhar & Tisdell, 2017;Rondeau et al, 2016;Smith & Day, 2018). Various research methods were used, including agent-based simulation models (Iftekhar & Tisdell, 2017); laboratory experiments (Banerjee et al, 2021;Krawczyk et al, 2016;Rondeau et al 2016); and framed field experiments (Liu et al, 2019 142 ).…”

“…), spatial-connection incentives (Banerjee et al, 2015;Fooks et al, 2016;Krawczyk et al, 2016;Liu et al, 2019;Windle et al, 2009); and joint bidding (Banerjee et al, 2021;Calel, 2012;Iftekhar & Tisdell, 2017;Rondeau et al, 2016;Smith & Day, 2018). Various research methods were used, including agent-based simulation models (Iftekhar & Tisdell, 2017); laboratory experiments (Banerjee et al, 2021;Krawczyk et al, 2016;Rondeau et al 2016); and framed field experiments (Liu et al, 2019 142 ). Opportunities for producers to submit joint bids in conservation auctions were also implemented on the ground in the "Auction for Landscape Recovery" in Australia Those papers testify of increasing recognition of the importance of coordination to reach ecological thresholds, in economic research, including by researchers promoting competitive approaches to PES as a solution to improve cost-efficiency.…”

“…Latacz-Lohmann & Schilizzi, 2005), and an auction to reduce nutrient runoff into Lake Erie in the United States(Palm-Forster et al, 2016a). Conclusions can be insightful Banerjee et al (2021). concluded, for example, that joint bidding improves cost-efficiency and environmental benefits when no individual agglomeration bonus is offered, but not otherwise.Liu et al (2019, p. 843) concluded that "in a PES auction that provides agglomeration bonuses, subjects tend to bid less in anticipation of receiving bonus payments when their neighbours are also successful in the auction".…”