Conservation auctions, collusion and the endowment effect

Justin Dijk and Erik Ansink

No 18-093/VIII, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We contribute to the literature on the optimal design of auction mechanisms for the procurement of nature conservation activities. We use an economic experiment to examine whether the market efficiency of conservation auctions increases or decreases with repetition. Theory predicts that repetition facilitates collusion among sellers in procurement auctions, while behavioral economics suggests that repetition may increase market efficiency because it attenuates the endowment effect - the phenomenon that ownership of a good tends to increase one's valuation of the good. We find that of these two countervailing effects, the latter has the upper hand; average bids decrease monotonically over the consecutive auctions. Since repetition increases market efficiency, conservation contracts can be of shorter duration and procured at a higher frequency than has been suggested before.

Keywords: Auctions; procurement; endowment effect; collusion; nature conservation (search for similar items in EconPapers)
JEL-codes: C91 D44 H57 Q57 (search for similar items in EconPapers)
Date: 2018-11-20
New Economics Papers: this item is included in nep-cbe, nep-com, nep-cta, nep-exp and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20180093

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