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Evaluating conservation auctions with limited information: the policy maker’s predicament

Steven Schilizzi and Uwe Latacz-Lohmann

No 100884, Working Papers from University of Western Australia, School of Agricultural and Resource Economics

Abstract: Buying environmental services from private landholders using tendering mechanisms are usually subject to a budget constraint. Auction theory has mostly focused on target-constrained auctions and is less well developed for this type of auction. This paper examines a theoretical model specifically developed for budget-constrained tenders and assesses its capacity to predict tendering performance under information limitations typical of those found in field applications. But this assessment cannot be done without complementing the model with controlled laboratory experiments. Subject to their external validity, we find that the model is able to make the correct policy recommendation when comparing the tender to an equivalent fixed price scheme, even when the accuracy of its prediction is far from perfect. However, the study suggests that more than a single point estimate of bidders’ costs is needed for this to happen, indicating that it should be worthwhile for policy administrators to invest in some information acquisition before deciding to run a tender.

Keywords: Environmental Economics and Policy; Land Economics/Use (search for similar items in EconPapers)
Pages: 33
Date: 2011-02-18
New Economics Papers: this item is included in nep-env and nep-exp
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwauwp:100884

DOI: 10.22004/ag.econ.100884

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