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The influence of contract length on the performance of sequential conservation auctions

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  • Thilo W. Glebe

Abstract

The present article explores the extent to which the performance of a sequential conservation auction can be improved by changing the duration of conservation contracts. Optimal bidding in the context of a sequential conservation auction is modeled as a dynamic optimization problem and solved through backward induction. We show that a longer duration of conservation contracts increases not only the privately optimal bid of a risk‐neutral bidder but also the probability that a land plot is included in a conservation program. Whether a longer duration of conservation contracts increases or decreases the budgetary cost effectiveness and economic efficiency of a sequential auction depends on the scale of variation for the cutoff bid.

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  • Thilo W. Glebe, 2022. "The influence of contract length on the performance of sequential conservation auctions," American Journal of Agricultural Economics, John Wiley & Sons, vol. 104(2), pages 739-764, March.
    • Handle: RePEc:wly:ajagec:v:104:y:2022:i:2:p:739-764
    DOI: 10.1111/ajae.12247
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