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How well do conservation auctions perform in achieving landscape-level outcomes? A comparison of auction formats and bid selection criteria

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  • Md Sayed Iftekhar
  • Uwe Latacz-Lohmann

Abstract

This paper studies the performance of auction design features regarding pricing mechanisms and bid selection criteria for securing wildlife zones across different holdings. We compare two pricing mechanisms: a discriminatory-price auction and a uniform-price ascending auction, and four bid selection criteria on the basis of: total bid, bid-per-value ratio, bid-per-area ratio and a mixed criterion where bids are formed on the basis of cost but they are selected based on the bid-per-value ratio. We develop a best-response group-bidding model for a discriminatory-price auction where bidders form optimal group bids for individual wildlife zones. In the uniform-price ascending auction, individual landholders respond to prices, which are successively raised by the auctioneer and whenever all the landholders from a single zone agree to participate (i.e. the first zone is formed), the auction stops. Based on numerical simulations using a bio-economic model of malleefowl conservation, we observe that the discriminatory-price auction is more cost-effective than the uniform-price ascending auction. However, the budgetary cost-effectiveness of a discriminatoryprice auction is sensitive to bidder uncertainty about the number of competing bidder groups and the highest cost of establishing a wildlife zone among these groups. In terms of bid selection, the mixed bid selection criterion performs best. We discuss the policy implications of these findings.
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  • Md Sayed Iftekhar & Uwe Latacz-Lohmann, 2017. "How well do conservation auctions perform in achieving landscape-level outcomes? A comparison of auction formats and bid selection criteria," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 61(4), pages 557-575, October.
  • Handle: RePEc:bla:ajarec:v:61:y:2017:i:4:p:557-575
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    File URL: http://hdl.handle.net/10.1111/1467-8489.12226
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    7. Nick Hanley & Simanti Banerjee & Gareth D. Lennox & Paul R. Armsworth, 2012. "How should we incentivize private landowners to ‘produce’ more biodiversity?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 28(1), pages 93-113, Spring.
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    10. Xiaohong Deng & Zhongmin Xu, 2015. "Green Auctions and Reduction of Information Rents in Payments for Environmental Services: An Experimental Investigation in Sunan County, Northwestern China," PLOS ONE, Public Library of Science, vol. 10(3), pages 1-15, March.
    11. John Rolfe & Jill Windle & Juliana McCosker, 2009. "Testing and Implementing the Use of Multiple Bidding Rounds in Conservation Auctions: A Case Study Application," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 57(3), pages 287-303, September.
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    13. Simanti Banerjee & Anthony Kwasnica & James Shortle, 2015. "Information and Auction Performance: A Laboratory Study of Conservation Auctions for Spatially Contiguous Land Management," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 61(3), pages 409-431, July.
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    2. Zhaoyang Liu & Simanti Banerjee & Timothy N. Cason & Nick Hanley & Qi Liu & Jintao Xu & Andreas Kontoleon, 2024. "Spatially coordinated conservation auctions: A framed field experiment focusing on farmland wildlife conservation in China," American Journal of Agricultural Economics, John Wiley & Sons, vol. 106(4), pages 1354-1379, August.
    3. Balmford, Ben & Collins, Joseph & Day, Brett & Lindsay, Luke & Peacock, James, 2023. "Pricing rules for PES auctions: Evidence from a natural experiment," Journal of Environmental Economics and Management, Elsevier, vol. 122(C).
    4. Nguyen, Chi & Latacz-Lohmann, Uwe & Hanley, Nick & Schilizzi, Steven & Iftekhar, Sayed, 2022. "Spatial Coordination Incentives for landscape-scale environmental management: A systematic review," Land Use Policy, Elsevier, vol. 114(C).

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