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

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.JEL classification: C72, C73, C91, C92, Q24, Q57

Understanding Pollinator Habitat Conservation under Current Policy Using Economic Experiments

“…This type of laboratory experiment has been used previously in the literature and shown to work well to test incentive mechanisms for land conservation decisions [33][34][35]. Since CP-42 is a relatively new policy and actual detailed enrollment data are unavailable, we use these economic experiments to predict behavior under the implementation of this policy.…”

Assessing Collective Measures in Rural Policy: The Effect of Minimum Participation Rules on the Distribution of Benefits from Irrigation Infrastructure

“…Equation (10) states that the worth attributed to the ith player through the SV is given by its average marginal contribution to any possible grouping of the players. The marginal contribution of any player i is defined by the expression v(s) − v(s − {i}), which indicates that is given by the value obtained by the coalition minus the value obtained by the coalition when player i is not a member of it.…”

Assessment of greening and collective participation in the context of agri-environmental schemes: The case of Andalusian irrigated olive groves

“…Firstly, further research is needed to estimate gains from the collective participation in AES and find the necessary information to set the appropriate bonus. In this regard, while expected gains from the reduction of transaction costs could easily be estimated, those deriving from improved environmental performance are far more difficult to quantify as they depend not only on the requisites/practices included in the AES, but also the proximity and configuration of enrolled farmland (Sutherland et al, 2012;Banerjee et al, 2014). These facts are evidence that an up-to-30% bonus may be too rough an estimation to reflect society's net gains from collective participation.…”

“…As highlighted by Franks (2011), the use of facilitators is key to creating groups in collective/collaborative AES. These cooperatives normally embody a common trusted platform for the setting-up of groups, providing information to farmers (e.g., about other farmers), which Banerjee et al (2014) highlight as vital for engaging farmers in this type of collective scheme. Therefore, results suggest that it would be recommendable to identify these facilitators and take them into account when designing collective AES.…”

“…Specifically, increasing collective participation in AES reduces the number of applications to be processed as well as monitoring costs, consequently reducing the transaction costs incurred by the government (Franks, 2011;Emery & Franks, 2012). Besides, if collective participation in AES is implemented in such a way that ensures the proximity (Sutherland et al, 2012) and the correct spatial configuration (Banerjee et al, 2014) of the farms that form the collective, a greater environmental effect would also be expected. As highlighted by Austin et al (2014), collective management of natural resources can better match the ecological scale, thus leading to their more efficient and sustainable management.…”