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Predicting the performance of conservation tenders when information on bidders's costs is limited

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  • Schilizzi, Steven
  • Latacz-Lohmann, Uwe

Abstract

Buying environmental services from private landholders using tendering mechanisms are usually subject to a budget constraint. Auction theory has mostly focused on target-constrained auctions and is not well developed for this type of auction. This paper examines the predictive capacity of a simple model developed for budget-constrained tenders, already used to design new conservation programs, by submitting it to controlled lab experiments. We study the capacity of the model to predict both experimental bids and the performance of the auction institution, based on the kind of limited information typically available to a conservation agency. We conclude there exists an optimal level of information on bidders’ costs, neither too large nor to small, making the tender worth considering as a policy option as well as allowing an ex-ante assessment of its economic performance.

Suggested Citation

  • Schilizzi, Steven & Latacz-Lohmann, Uwe, 2009. "Predicting the performance of conservation tenders when information on bidders's costs is limited," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 48171, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare09:48171
    DOI: 10.22004/ag.econ.48171
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    References listed on IDEAS

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    1. Katherine Reichelderfer & William G. Boggess, 1988. "Government Decision Making and Program Performance: The Case of the Conservation Reserve Program," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(1), pages 1-11.
    2. Johansson, Robert C., 2006. "Participant Bidding Enhances Cost Effectiveness," Economic Brief 34085, United States Department of Agriculture, Economic Research Service.
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    9. Schilizzi, Steven & Latacz-Lohmann, Uwe, 2007. "Assessing the performance of conservation auctions: an experimental study," 2007 Conference (51st), February 13-16, 2007, Queenstown, New Zealand 10436, Australian Agricultural and Resource Economics Society.
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