Market-based conservation instruments, such as payments, auctions or tradable
permits, are environmental policies that create financial incentives for
landowners to engage in voluntary conservation on their land. But what if
ecological processes operate across property boundaries and land use decisions
on one property influence ecosystem functions on neighboring sites? This paper
examines how to account for such spatial externalities when designing
market-based conservation instruments. We use an agent-based model to analyze
different spatial metrics and their implications on land use decisions in a
dynamic cost environment. The model contains a number of alternative submodels
which differ in incentive design and social interactions of agents, the latter
including coordinating as well as cooperating behavior of agents. We find that
incentive design and social interactions have a strong influence on the spatial
allocation and the costs of the conservation market.Comment: 11 pages, 6 figure