The influence of contract length on the performance of sequential conservation auctions

Thilo W. Glebe

American Journal of Agricultural Economics, 2022, vol. 104, issue 2, 739-764

Abstract: The present article explores the extent to which the performance of a sequential conservation auction can be improved by changing the duration of conservation contracts. Optimal bidding in the context of a sequential conservation auction is modeled as a dynamic optimization problem and solved through backward induction. We show that a longer duration of conservation contracts increases not only the privately optimal bid of a risk‐neutral bidder but also the probability that a land plot is included in a conservation program. Whether a longer duration of conservation contracts increases or decreases the budgetary cost effectiveness and economic efficiency of a sequential auction depends on the scale of variation for the cutoff bid.

Date: 2022
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https://doi.org/10.1111/ajae.12247

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Persistent link: https://EconPapers.repec.org/RePEc:wly:ajagec:v:104:y:2022:i:2:p:739-764

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