Allocating Pollution Load Reductions between States Fairly, Efficiently and Successfully

Pollution, Politics, Chesapeake Bay, Transboundary Agreements, Environmental Economics and Policy, Resource /Energy Economics and Policy, Q58,

An Iterative Auction for Spatially Contiguous Land Management: An Experimental Analysis

Tackling the problem of ecosystem services degradation is an important policy challenge. Different types of economic instruments have been employed by conservation agencies to meet this challenge. Notable among them are Payment for Ecosystem Services (PES) schemes that pay private landowners to change land uses to pro-environmental ones on their properties. This paper focuses on a PES scheme – an auction for the cost-efficient disbursal of government funds for selection of spatially contiguous land management projects. The auction is structured as an iterative descending price auction where every bid is evaluated on the basis of a scoring metric – a benefit cost ratio. The ecological effectiveness and economic efficiency of the auction is tested with data generated from lab experiments. These experiments use the information available to the subjects about the spatial goal as the treatment variable. Analysis indicates that the information reduces the cost-efficiency of the auction. Experience with bidding also has a negative impact on auction efficiency. The study also provides an analysis of the behavior of winners and losers at the final auction outcome. Winners and losers are found to have significantly different behavior with winners bidding much higher than their costs than losers.Ecosystem Services, economic experiments, auctions, spatial contiguity, Environmental Economics and Policy, Institutional and Behavioral Economics, Land Economics/Use, Resource /Energy Economics and Policy, Q,

The Agglomeration Vickrey Auction for the promotion of spatially contiguous habitat management: Theoretical foundations and numerical illustrations

There is much interest among economists and policy makers in the use of reverse auctions to purchase habitat conservation on private lands as a mechanism for minimizing public expenditures to achieve desired conservation outcomes. Examples are the Conservation Reserve Program (US) and Environmental Stewardship Scheme (UK). An important limitation of these auctions as implemented to date is that there is no explicit consideration of the spatial pattern of participation in the evaluation of bids. In this study we present the structure of a simple auction – the Agglomeration Vickrey Auction that implements a Vickrey-Clarke-Groves mechanism. The auction is designed to attain conservation goals through specific spatial patterns of land management while minimizing the total budgetary cost. We present the theoretical structure of the AVA and provide simple numerical examples to illustrate the effectiveness of the mechanism. We conclude with a section documenting the experiments that are to be conducted as a part of the future research on this study.auctions, environmental conservation, spatial, Environmental Economics and Policy, Land Economics/Use,

Asymmetric Information and Cooperation

This thesis investigates the theory of cooperative behavior in the presence of asymmetric information. Traditionally, the core has been a powerful and much used solution concept to describe cooperative outcomes. In settings where agents have some private information, it may be appropriate to include the opportunity for communication in the development of the core. I study the relationship of various core solution concepts with prevalent noncooperative solution concepts for environments with asymmetric information. The core definitions examined vary by the level of communication assumed. In Chapter 2, I investigate the welfare properties of market equilibria. I demonstrate that appropriate communication restrictions can be placed on the core (and efficiency) in order to obtain first and second welfare theorems. In Chapter 3, I discuss the Bayesian implementation of core solutions. If full communication is assumed, Palfrey and Srivastava (1987) have shown that the core is not Bayesian implementable: a game cannot be constructed that has only core allocations as its equilibria. I demonstrate that communication restrictions on the core are sufficient to obtain positive Bayesian implementation results in the environment studied by Palfrey and Srivastava. In other words, a game can be constructed that entices noncooperative players to choose strategies that are cooperative under limited communication. In Chapter 4, I examine cooperation between bidders in private value, sealed bid auctions. I assume that bidders can overcome their one period temptation to break any collusive agreement, and that they attempt to formulate a collusive mechanism. However, each bidder's valuations are still his own, private information. If he is not given the proper incentives, he may lie about his values in order to increase his profits. Therefore, any collusive mechanism must be incentive compatible and is likely to be, at a minimum, interim efficient. I demonstrate that the theory provides some predictions about the set of collusive mechanisms chosen by bidders and that, when moving to a setting where multiple objects are for sale, the set of feasible collusive mechanisms grows. When multiple objects are for sale, there exist incentive compatible mechanisms that are preferred by all bidders to the only incentive compatible mechanisms in the single object case. Laboratory experiments indicate that these predictions are often consistent with actual behavior. However, deviations by some bidders suggest some weaknesses in this approach.</p

Information Aggregation in Double Auctions: Rational Expectations and the Winner's Curse

This paper inquires about the ability of double auction institutions to aggregate information in the context of a "common value" information structure that is known to produce the winner's curse in sealed bid environments. While many fundamental features of the economic trading mechanism are different from those studied in the context of sealed bids, the pattern of information distributed to the population of traders is the same. This gives us an opportunity to determine if the behaviors reported in sealed bid environments can be detected in the more active market environment. As such, the experiments are also a test of the robustness of earlier experiments that demonstrate that in economies with homogeneous preferences single compound securities organized by double auctions are able to aggregate information. The basic result is that a severe winner's curse is not observed. The irrationality observed in sealed bids does not extend itself to the double auction environment. Information aggregation is observed and the rational expectations model receives support

Agglomeration Bonus in Local Networks: A laboratory examination of spatial coordination failure

The Agglomeration Bonus (AB) – a subsidy mechanism can incentivize neighboring landowners to spatially coordinate their land use decisions for effective provision of ecosystem services such as biodiversity protection. In this paper we explore individual AB performance on a local network in a laboratory setting. In our experiments, we vary the local network size while keeping the number of neighbors for each player same. Results suggest better AB performance and greater spatial coordination in smaller groups relative to bigger ones. In bigger groups however we observe localized areas of coordinated land use choices which indicate partial AB effectiveness

An Iterative Auction for Spatially Contiguous Land Management: An Experimental Analysis

Tackling the problem of ecosystem services degradation is an important policy challenge. Different types of economic instruments have been employed by conservation agencies to meet this challenge. Notable among them are Payment for Ecosystem Services (PES) schemes that pay private landowners to change land uses to pro-environmental ones on their properties. This paper focuses on a PES scheme – an auction for the cost-efficient disbursal of government funds for selection of spatially contiguous land management projects. The auction is structured as an iterative descending price auction where every bid is evaluated on the basis of a scoring metric – a benefit cost ratio. The ecological effectiveness and economic efficiency of the auction is tested with data generated from lab experiments. These experiments use the information available to the subjects about the spatial goal as the treatment variable. Analysis indicates that the information reduces the cost-efficiency of the auction. Experience with bidding also has a negative impact on auction efficiency. The study also provides an analysis of the behavior of winners and losers at the final auction outcome as well as during the entire lifetime of the auction. Winners and losers are found to have significantly different behavior in this analysis. Behavior is also found to be significantly affected by the treatments as well

The Role of Auctions in University Intellectual Property Transactions

Reflecting the trend in the business community, universities are increasingly investing in intellectual property rights. But they are often unsuccessful in realizing licensing revenues that provide adequate return on investment. This paper considers how auctions could potentially increase licensing efficiency and make university intellectual property transactions more productive. The paper begins by placing the auction in the universe of possible transaction forms and considers how well it aligns to the unique nature of university rights. Penn State\u27s recent patent auctions provide useful context. The paper then provides recommendations to modify the auction structure for maximum benefit in university intellectual property transactions