Marketing Ecosystem Services from Agricultural Land: Stated Preferences over Payment Mechanisms and Actual Sales of Farm-Wildlife Contracts

Agriculture conventionally supplies food, fiber and fuel that consumers can purchase through the market. With the right incentives, farmers can also provide ecosystem services such as wildlife habitat, climate regulation, surface water flows and waste absorption and breakdown. Such incentives have so far come almost entirely from government-sponsored programs that rely on financial assistance to farmers to encourage them to alter agricultural practices or input mix to enhance ecosystem services. Programs recently implemented in Costa Rica and Columbia rely on payments by the beneficiaries of the ecosystem services, such as municipal water companies and water users (Pagiola et al. 2002). Few of these programs, however, have attempted to establish a market for ecosystem services in which the beneficiaries of such services pay the suppliers their personal values of ecosystem services in an actual market. Markets for ecosystem services must overcome two major challenges. In order to set prices for ecosystem services at the right level, it is imperative to understand consumers preferences. Farmland, however, has multiple attributes such as wildlife habitat services and landscape view; the marginal rate of substitution among those attributes must be understood to design marketable products for ecosystem services. Moreover, many ecosystem services are public goods for which traditional markets are ill-suited, because many individuals can receive benefits simultaneously regardless of whether they have paid part of the cost of provision. Therefore, consumers have an incentive to free-ride on others. Evidence from previous research on public goods clearly suggests that under-contribution is typical (e.g., Ledyard 1995). The overall goal of this study is to explore the potential to establish an actual market in which the public can purchase ecosystem services generated by agricultural land. More specifically, this paper evaluates the performance of alternative elicitation methods that are intended to reduce individuals incentives to free-ride on others payments for ecosystem services. Using a choice experiment involving a large-scale mail survey, we first estimate the marginal rate of substitution consumers place on various attributes of farmland including the ecosystem services such land can provide. We further compare the results across different payment mechanisms and examine which ones are capable of revealing demand that is closer to consumers true value. Second, we attempt to establish an actual market in which individuals are asked to purchase a share of a farm contract to provide ecosystem service with real money under different payment mechanisms. We compare the market outcomes with the choice experiments. To the best of our knowledge, this is the first study to examine the performance of different payment mechanisms for provision of ecosystem services using field experiments both within a hypothetical setting and by developing an actual market. The ecosystem service in question in this study is habitat for a grassland-nesting bird called the Bobolink (Dolichonyx oryivorus). Yellow and black Bobolinks establish ground nests in hay fields from mid-May into early June. Their visibility and entertaining character, combined with evidence that many birds, including bobolinks, are experiencing population declines (Sauer et al. 2004), make the bird a leading candidate to attract public interest in efforts to manage farmland for vulnerable wildlife. Previous studies have established that hay harvesting conducted during the birds five to six week nesting period is devastating to fledgling success (e.g., Mitchell et al. 2000). A fairly moderate shift in the harvest schedule could provide significant refuge for nesting birds while causing some losses of the quantity and quality of the hay harvested. If a market developed that paid farmers acceptable compensation to protect grassland birds, then farmers would have an incentive to add an ecosystem service to their revenue base while enhancing environmental quality for wildlife. In this study, we compare four payment mechanisms applied in field experiments: 1) voluntary contribution mechanism, 2) provision point with a money-back guarantee and proportional rebate of excess contributions (PPMBG-PR), 3) uniform-price, multi-buyer auction and 4) pivotal mechanism. Voluntary contribution mechanism has no provision point but has a money-back guarantee if enough money is not raised. Under PPMBG-PR, the public good is supplied only if a pre-specified amount of money (the provision point) is raised, and contributors receive their money back if the market fails to raise that amount. Under a multi-buyer auction, everyone who is willing to pay above a certain price will pay a price such that the total sum will be enough to cover the cost for a farmer to change harvest practices. Under a pivotal mechanism only those consumers whose payments make a difference in the provision of the good would pay. The pivotal mechanism is incentive compatible and is used as the baseline. We test the following hypotheses on the WTP, market participation rate and total revenue collection: (1) WTP: Voluntary contribution < Multi-buyer Auction < PPMBG-PR < Pivotal (2) Participation rate: Voluntary contribution < PPMBG-PR < Multi-buyer auction < Pivotal (3) Revenue collection: Pivotal < Voluntary < Multi-buyer auction < PPMBG-PR We perform a large-scale cross-mechanism comparison using two types of field experiments, a survey involving hypothetical questions and a functioning market for an ecosystem service. In the survey, the subjects are randomly assigned to one of the elicitation methods. We posit a hypothetical situation involving a market for contracts with farmers, describe the assigned elicitation method and ask respondents to compare several sets of two alternative farm wildlife contracts, each with five attributes presented in a stated-choice format. One of the attributes is to change the timing of hay harvesting to enhance the success of a specified number of bobolink fledglings on a given size of farm. The survey data were collected in fall of 2006. Survey questionnaires were sent to all of the 2,987 households in Jamestown, Rhode Island. The response rate was about 37% after accounting for undelivered surveys. Although still preliminary, a key result from the choice experiment is that consumers are least willing to pay for farm wildlife contracts under the voluntary contribution mechanism. The payment method that generated the greatest total purchases of farm wildlife contracts was the multi-buyer auction, followed by the pivotal mechanism and PPMBG-PR, respectively. This result suggests that some features of the payment mechanisms (such as setting of a provision point, fairness and a money-back guarantee) encourage consumers to reveal demand that is closer to each consumer true value of the good than the demand revealed by a simple voluntary contribution mechanism in a field experiment using a hypothetical situation. We are currently in the process of launching an ecosystem-service market in Jamestown by establishing actual farm wildlife contracts with farmers and selling shares of those contracts to consumers. The market will be open to the public for two months during March and April, 2007. Each farm wildlife contract will be tied to one or more of the payment mechanisms and whether each contract will remain effective during the breeding season will depend on the market outcome under each mechanism. Consumers will be randomly assigned to one of the elicitation methods. Using market data, we will compare the actual consumer behavior across alternative methods and also to their willingness to pay as estimated in the survey choice experiment.Land Economics/Use,

An Initial Exploration of Improved Numerics within the Guidelines of the Negative Spalart-Allmaras Turbulence Model

A simple modification to the negative Spalart-Allmaras turbulence model is suggested so that when the turbulence working variable, ~v, is negative, diagonal dominance is increased, as is the tendency for the time-advancement scheme to push e toward positive values. Owing to the fact that the modification is only active when ~v is less than zero, the physical model is left unchanged. Using the proposed modification with a strong implicit solver based on Newton's method, convergence rates can be somewhat improved, with typical reductions in iterations and computer time on the order of 15-50%. The benefits are realized primarily when second- or higher-order accuracy is used for discretizing the convective terms in the turbulence model because of large overshoots that can occur with these schemes at the edges of boundary layers and wakes. For flowfields with few regions of negative ~v, or on very fine meshes where ~v is always greater than zero, little or no benefits should be expected

Ecosystem Services Beyond Valuation, Regulation and Philanthropy: Integrating Consumer Values into the Economy

Environmental Markets, Ecosystem Service Markets, Payment For Ecosystem Services, Incentives, Nature's Services, Resource /Energy Economics and Policy, Q20, Q57, C93, H41,

Do Stated Preference Values Predict Revealed Behavior in “New” Markets for Ecosystem Services? A Comparison of Experiments Addressing Establishing A Market for Farmland Ecosystem Services

Resource /Energy Economics and Policy,

Preferences for Residential Development Attributes and Support for the Policy Process: Implications for Management and Conservation of Rural Landscapes

The rural public may not only be concerned with the consequences of land management; residents may also have systematic preferences for policy instruments applied to management goals. Preferences for outcomes do not necessarily imply matching support for the underlying policy process. This study assesses relationships among support for elements of the policy process and preferences for management outcomes. Preferences are examined within the context of alternative proposals to manage growth and conserve landscape attributes in southern New England. Results are based on (a) stated preferences estimated from a multi-attribute contingent choice survey of rural residents, and (b) Likert-scale assessment of strength of support for land use policy tools. Findings indicate general but not universal correlation among policy support indicators and preferences for associated land use outcomes, but also confirm the suspicion that policy support and land use preference may not always coincide.Agricultural and Food Policy,

Evaluating the Consortia Purchase: Journal Usage in a Multi-Institution Setting

When two or more institutions share a license, how do they measure use and value? For over a decade, the Levy Library at the Icahn School of Medicine at Mount Sinai, the Sid and Ruth Lapidus Library at the New York University School of Medicine, and New York University Libraries at New York University have shared several publisher packages and journal title subscriptions. In this paper, we present our analysis of usage data to assess the value of some of these consortial arrangements in their totality and to each library. Based on this analysis, we were able to adjust how each institution contributes to consortial arrangements. The paper will discuss challenges in analyzing consortial arrangements based on usage data and offer suggestions for how consortia-based acquisitions can be an effective allocation of library funds and strengthen support for the library in its institution

Strategic Operations Research and the Edelman Prize Finalist Applications 1989-1998

In an earlier study we examined the available evidence on the Edelman Prize finalist applications 1989-1998. This study concluded that 13 of the 42 private sector applications provide examples of strategic operations research (SOR) when SOR is defined as operations research that creates a sustainable competitive advantage. In a follow-up study we tested our classifications, gathering longitudinal information on the continued success of the Edelman applications. We contacted people who were familiar with all the private sector applications that were Edelman finalists 1989-1996 and had at least five years of history since the competition. We describe the post-Edelman history of these applications and use this data to reassess their strategic role. We found that the longitudinal data provides evidence to support our original classification, but also suggests that several additional applications were more strategic than was originally apparent. We conclude that almost 60% (20 of 34) of these applications created a sustainable competitive advantage for their firms and provide examples of SOR

HIV and fertility change in rural Zimbabwe

Fertility transition and HIV epidemics are currently running parallel in some sub-Saharan African populations. Interactions between the two at the individual and population levels could accentuate or moderate the resulting demographic trends. We review a number of mechanisms through which an HIV epidemic and responses to it can affect birth rates, through the biological and behavioural proximate determinants. Uninfected as well as infected people can be affected and many of the changes could have unintended consequences for fertility at the individual level. Results from a small-scale in-depth study in two rural areas of Zimbabwe are reviewed. These indicate that the local HIV epidemic has begun to influence the proximate determinants of fertility. If observed trends persist, a modest acceleration in the recent decline in birth rates seems plausible

Ecosystem Services beyond Valuation, Regulation, and Philanthropy: Integrating Consumer Values into the Economy

Ecosystem services have been identified as a central link between society, or human systems, and the structure and function of natural systems (e.g., U.S. LTER 2007, MEA 2005). A fundamental economic problem is that while almost everyone—environmental groups, policy makers, and broad segments of the general public—seems to believe ecosystem services are valuable, the available public policy tools and approaches for private action fall short, and often omit, a direct link to the real values of the people. If ecosystem services are of economic value, then a fundamental challenge concerns how to identify the link between ecosystem services and the quality of life of individual households, and how to use that link to integrate ecosystem service values into the decisions of businesses and individuals in society. Given current markets and policies decision–makers are unable to recognize the full value of services ecosystems provide. What can be done to integrate ecosystem service values into the economy? After reviewing a fundamental cause for why markets often overlook ecosystem services, and after considering some limitations of the often effective approaches of philanthropy and government, we consider the potential to leverage experimental economics to create and test approaches to integrate values at the individual level into markets addressing ecosystem services