Performance of agglomeration bonuses in conservation auctions: lessons from a framed field experiment

Liu, Z. , Xu, J., Yang, X., Tu, Q., Hanley, N. and Kontoleon, A. (2019) Performance of agglomeration bonuses in conservation auctions: lessons from a framed field experiment. Environmental and Resource Economics, 73(3), pp. 843-869. (doi: 10.1007/s10640-019-00330-1)

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The incorporation of an agglomeration bonus payment to encourage spatial coordination in auction mechanisms to allocate payments for ecosystem services (PES) contracts has been explored as a promising innovation that could enhance the effectiveness of PES schemes. Empirical evidence on the performance of this particular design feature is scant, and almost exclusively derived from laboratory experiments using student subjects. This study reports results from a framed field experimental auction allocating PES contracts with and without agglomeration bonus payments using actual forest land owners in rural China as subjects. We find tentative evidence that, in a PES auction that provides agglomeration bonuses, subjects tend to bid less in anticipation of receiving bonus payments when their neighbours are also successful in the auction. In addition, we have mixed findings as to whether the agglomeration bonus is able to induce a bidding pattern in favour of contiguous conservation. The two sets of results convey some encouraging signals of the theoretically postulated cost-effectiveness and conservation efficacy of the agglomeration bonus. Further research from the actual field is warranted in light of the policy significance of this innovative incentive mechanism.

Item Type:Articles
Additional Information:The authors are grateful for the financial support from the British Academy (Reference: SG121920) and the Environment for Development Initiative.
Glasgow Author(s) Enlighten ID:Hanley, Professor Nicholas and Liu, Dr Zhaoyang
Authors: Liu, Z., Xu, J., Yang, X., Tu, Q., Hanley, N., and Kontoleon, A.
College/School:College of Medical Veterinary and Life Sciences > School of Health & Wellbeing > Health Economics and Health Technology Assessment
College of Medical Veterinary and Life Sciences > School of Biodiversity, One Health & Veterinary Medicine
Journal Name:Environmental and Resource Economics
ISSN (Online):1573-1502
Published Online:09 March 2019
Copyright Holders:Copyright © 2019 The Authors
First Published:Environmental and Resource Economics 73(3):843-869
Publisher Policy:Reproduced under a Creative Commons License

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