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Go big or go home: impact of the auction scale on the performance of conservation auctions

Author

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  • Adrien Coiffard

    (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier)

Abstract

Conservation auctions are competitive tenders used to allocate conservation contracts to voluntary farmers. This study evaluates whether a buyer of environmental services should conduct many smallscale auctions or a single large-scale auction to allocate a given number of conservation contracts. To examine the impact of an auction's scale on its performance, I first establish theoretical predictions using simulations, assuming bidders adopt the equilibrium bidding strategy derived from a reverse auction model where competition is based solely on price. I then validate these predictions through a decontextualized online experiment, with three different treatments, each varying the number of bidders. The scale of the auction varies, with the exogenous number of bidders (N) and the number of units purchased (M, the target) both changing proportionally. I do not study the impact of bidder participation, but rather the impact of the auction scale while maintaining a constant level of competition (N/M ) across treatments. Findings show that cost-effectiveness tends to improve as the scale of the auction increases. However, no significant relationship is found between auction scale and either allocative efficiency or bidders' rents.

Suggested Citation

  • Adrien Coiffard, 2024. "Go big or go home: impact of the auction scale on the performance of conservation auctions," Working Papers hal-04801543, HAL.
    • Handle: RePEc:hal:wpaper:hal-04801543
    Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-04801543v1
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    File URL: https://hal.inrae.fr/hal-04801543v1/document
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