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The Effect of Information on Discriminatory-Price and Uniform-Price Reverse Auction Efficiency: An Experimental Economics Study of the Purchase of Ecosystem Services

Author

Listed:
  • Duke, Joshua M.
  • Messer, Kent D.
  • Lynch, Lori
  • Li, Tongzhe

Abstract

This study compares the fiscal efficiency of two types of reverse auctions, uniform-price and discriminatory-price, for the purchase of ecosystem services (PES) under different structures of information. Public agencies that conduct reverse PES auctions traditionally provide public information such as the budget and the accepted bids in past rounds. The experimental results from 180 participants suggest that providing varying levels of public information affects both seller behavior and auction efficiency, as measured by the limitation of rents. In this controlled setting, the most efficient auction is found to be a discriminatory-price auction with partial information. This auction produced efficiency gains of 7% of the experimental conservation budget and roughly 25% lower rents than the other auction-information treatments.

Suggested Citation

  • Duke, Joshua M. & Messer, Kent D. & Lynch, Lori & Li, Tongzhe, 2017. "The Effect of Information on Discriminatory-Price and Uniform-Price Reverse Auction Efficiency: An Experimental Economics Study of the Purchase of Ecosystem Services," Strategic Behavior and the Environment, now publishers, vol. 7(1-2), pages 41-71, December.
    • Handle: RePEc:now:jnlsbe:102.00000073
    DOI: 10.1561/102.00000073
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    Citations

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    Cited by:

    1. Leah H. Palm-Forster & Paul J. Ferraro & Nicholas Janusch & Christian A. Vossler & Kent D. Messer, 2019. "Behavioral and Experimental Agri-Environmental Research: Methodological Challenges, Literature Gaps, and Recommendations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(3), pages 719-742, July.
    2. Simanti Banerjee & Timothy N. Cason & Frans P. de Vries & Nick Hanley, 2021. "Spatial Coordination and Joint Bidding in Conservation Auctions," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(5), pages 1013-1049.
    3. Stephanie Rosch & Sharon Raszap Skorbiansky & Collin Weigel & Kent D. Messer & Daniel Hellerstein, 2021. "Barriers to Using Economic Experiments in Evidence‐Based Agricultural Policymaking," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 43(2), pages 531-555, June.
    4. Paul, Laura A. & McGranaghan, Christina & Siders, A.R. & Dineva, Polina K. & Palm-Forster, Leah H. & Messer, Kent D., 2024. "Addressing coordination problems in residential buyouts: Experimental evidence for managed retreat in the face of climate change-related threats," Journal of Economic Behavior & Organization, Elsevier, vol. 226(C).

    More about this item

    Keywords

    Tenders; Auction efficiency; Laboratory experiments; Land conservation; Ecosystem service markets;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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