Designing Cost Effective Auctions as Instruments to Reduce Nutrients Run-off from Agriculture into the Baltic Sea - An Experimental Study

Karen Larsen and Markku Ollikainen

No 114401, 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland from European Association of Agricultural Economists

Abstract: This research studies the use of auctions for reducing leaching of phosphorus and nitrogen into the Baltic Sea. Auctions are introduced as a tool for creating environmental contracts in agriculture for the first time in Finland. A controlled laboratory experiment is used to analyze the effect of introducing a bundle mechanism in the auction. Landholders submit sealed bids on multiple parcels in a one shot reverse auction. Each parcel is assigned an environmental quality and varies in size. In one treatment landholders can offer bids on environmental contracts for their parcels individually. In the other treatment landholders are given the opportunity to bundle parcels of land together when submitting bids as well as submitting bids for individual parcels. The results suggest that the bundle mechanism increase environmental efficiency of the auction compared to the individual parcel auction. In the treatment with individual parcel bids environmental value significantly affects over half of landholders’ offers. The bundle treatment however shows sign of a cognitive bias where landholders use the hectare size to determine their offers.

Keywords: Resource/Energy; Economics; and; Policy (search for similar items in EconPapers)
Pages: 8
Date: 2011
New Economics Papers: this item is included in nep-env and nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/114401/files/Larsen_Karen_627.pdf (application/pdf)

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: https://EconPapers.repec.org/RePEc:ags:eaae11:114401

DOI: 10.22004/ag.econ.114401

Access Statistics for this paper

More papers in 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland from European Association of Agricultural Economists Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().