Landscape‐level determinants of the performance of an agglomeration bonus in conservation auctions

Chi Nguyen, Uwe Latacz‐Lohmann and Nick Hanley

Journal of Agricultural Economics, 2024, vol. 75, issue 2, 592-616

Abstract: The agglomeration bonus (AB) has been advocated as an incentive mechanism to boost spatially coordinated conservation efforts, where such coordination is thought to be beneficial to achieving biodiversity or other ecological outcomes. Specifically, an AB is paid to individual landholders if their conserved habitats are spatially connected to the conserved habitats of adjacent neighbours. This paper employs a series of controlled lab experiments with agriculture students to investigate the performance of AB in budget‐constrained discriminatory‐price auctions across different landscape types. We focus on the spatial correlation of opportunity costs and environmental benefits as one potentially important aspect of the landscape. We set up a stylised agricultural landscape where the conservation agency aims to connect fragmented wildlife habitats by incentivising farmers to enrol land in a conservation programme. We investigate the effects of an AB in landscapes where opportunity costs and environmental benefits are uncorrelated, negatively correlated or positively correlated over space. We found that the benefits of an AB in improving landscape‐scale environmental outcomes were significant in the positive correlation landscape. However, the AB resulted in worse outcomes in the uncorrelated and negative landscapes.

Date: 2024
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