Economics at your fingertips  

The Random Quantity Mechanism: Laboratory and Field Tests of a Novel Cost-Revealing Procurement Mechanism

Samuel D. Bell () and Nadia A. Streletskaya ()
Additional contact information
Samuel D. Bell: Oregon State University
Nadia A. Streletskaya: Oregon State University

Environmental & Resource Economics, 2019, vol. 73, issue 3, 899-921

Abstract: Abstract Information on private costs can improve the efficiency of programs that provide payment for environmental services in contexts involving information asymmetries and heterogeneous private costs. Using data from laboratory and field experiments, this paper presents and evaluates a novel private cost revealing mechanism, termed the random quantity mechanism (RQM), that can advance research in conservation contracting, payments for environmental services, and other similar settings. We examine the RQM’s performance in a laboratory setting using induced costs and report results obtained from the first field implementation of this mechanism, with smallholder farmers in Zambia. We show that the RQM is incentive-compatible, that participant decision-making maximizes expected payoffs, and that the mechanism provides non-parametric estimates of private costs. The paper contributes to economic field studies by introducing a new incentive-compatible mechanism that elicits individuals’ minimum willingness to accept across intensive margins, enabling researchers to estimate the supply of a service or commodity, and provides for exogenous variation in contract terms, which can aid in separately identifying the impacts of incentives and of participants’ willingness to accept on contract outcomes.

Keywords: Random quantity mechanism; Conservation auction; Procurement auction; Information asymmetry; Additionality; Payments for environmental services; BDM; Reverse auction; RQM; Zambia; Africa (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... al/journal/10640/PS2

Access Statistics for this article

Environmental & Resource Economics is currently edited by Ian J. Bateman

More articles in Environmental & Resource Economics from Springer, European Association of Environmental and Resource Economists Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-11-06
Handle: RePEc:kap:enreec:v:73:y:2019:i:3:d:10.1007_s10640-019-00335-w