How well do conservation auctions perform in achieving landscape-level outcomes? A comparison of auction formats and bid selection criteria

Md Sayed Iftekhar and Uwe Latacz-Lohmann

Australian Journal of Agricultural and Resource Economics, 2017, vol. 61, issue 4

Abstract: This paper studies the performance of auction design features regarding pricing mechanisms and bid selection criteria for securing wildlife zones across different holdings. We compare two pricing mechanisms: a discriminatory-price auction and a uniform-price ascending auction, and four bid selection criteria on the basis of: total bid, bid-per-value ratio, bid-per-area ratio and a mixed criterion where bids are formed on the basis of cost but they are selected based on the bid-per-value ratio. We develop a best-response group-bidding model for a discriminatory-price auction where bidders form optimal group bids for individual wildlife zones. In the uniform-price ascending auction, individual landholders respond to prices, which are successively raised by the auctioneer and whenever all the landholders from a single zone agree to participate (i.e. the first zone is formed), the auction stops. Based on numerical simulations using a bio-economic model of malleefowl conservation, we observe that the discriminatory-price auction is more cost-effective than the uniform-price ascending auction. However, the budgetary cost-effectiveness of a discriminatoryprice auction is sensitive to bidder uncertainty about the number of competing bidder groups and the highest cost of establishing a wildlife zone among these groups. In terms of bid selection, the mixed bid selection criterion performs best. We discuss the policy implications of these findings.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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Journal Article: How well do conservation auctions perform in achieving landscape-level outcomes? A comparison of auction formats and bid selection criteria (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aareaj:313558

DOI: 10.22004/ag.econ.313558

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