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

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  • Pengfei Liu
  • Stephen K. Swallow

Abstract

We present experimental results on the provision of multiple units of a threshold public good using individualized price auctions (IPA). The IPA asks each individual to pay the same price for each unit provided. The individual’s price can be either one’s bid or one’s pivotal price on the marginal unit provided by the group. The public good is provided in a sequential manner leveraging the provision point mechanism. We also investigate two market clearing rules: the ascending-unit rule, where the auctioneer determines the provision outcome starting from the first unit, until no more units can be provided; and the descending-unit rule, where the auctioneer determines the provision outcome starting from the last available unit, and provides as many units as possible. Experimental results show that the IPA approaches can increase the realized social surplus compared to the traditional pay-your-bids approach by almost a third.

Suggested Citation

  • Pengfei Liu & Stephen K. Swallow, 2019. "Providing Multiple Units of a Public Good Using Individualized Price Auctions: Experimental Evidence," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(1), pages 1-42.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/700622
    DOI: 10.1086/700622
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    Cited by:

    1. Zhi Li & Dongsheng Chen & Pengfei Liu, 2023. "Assurance payments on the coordination of threshold public goods provision: An experimental investigation," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(2), pages 407-436, April.
    2. Pengfei Liu, 2021. "Balancing Cost Effectiveness and Incentive Properties in Conservation Auctions: Experimental Evidence from Three Multi-award Reverse Auction Mechanisms," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(3), pages 417-451, March.
    3. Jens Abildtrup & Anne Stenger, 2022. "Report on valuation methods," Working Papers hal-04068881, HAL.
    4. Zhi Li & Pengfei Liu & Stephen K. Swallow, 2021. "Assurance Contracts to Support Multi-Unit Threshold Public Goods in Environmental Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(2), pages 339-378, October.

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