Behavioral and Experimental Economics Insights for Agri-environmental Challenges
Friday, Jan. 5, 2018 8:00 AM - 10:00 AM
- Chair: Paul Ferraro, Johns Hopkins University
Auction Performance and Bidder Response to Quality Information and Conservation Action Choice in Multi-round Conservation Procurement Auctions
AbstractIn conservation procurement auctions, information advantages exist for both landowners, regarding their costs of providing conservation actions, and buyers, regarding the quality of conservation actions. Providing bidders with access to this information can have substantial effects on bidder behavior and auction performance, as bidders control both the extent of their land that they submit for program enrollment and the conservation actions that they propose to implement in their bid. Access to quality information has been found to improve auction performance in single-round auctions with endogenous action choice (Conte and Griffin 2017), while such access is found to worsen auction performance in multi-round auctions with exogenous endowments and a bid-menu format (Cason et al. 2003). We implement a multi-round procurement auction with endogenous action choice in an induced-value laboratory experiment to explore the impact of access to quality information, presented as either the precise value of each action or a ranking of the three actions, and alternative bid-submission protocols on bidder behavior and auction performance. The bid submission treatment is implemented in a within-subject design format in which participants are asked to select a single action for submission for some of the periods and are asked to submit a bid menu in others. Our results demonstrating the impacts on auction performance of alternative auction designs should be particularly salient to policymakers as demand for cost-effective government programs grows amid increasing calls for fiscal austerity.
Supporting Private Provision of Ecosystem Services through Contracts: Evidence From Lab and Field Experiments
AbstractThe free riding incentive that exists in public good provision has been a major obstacle to establishing markets or payment incentives for ecosystem services. The use of monetary incentives to induce private provision of public goods has gained increasing support, including from the USDA Office of Environmental Markets, to help to market ecosystem services provided by alternative farmland management practices. Using a series of lab experiments and a pilot field experiment, we explore new ways to raise money from individuals to pay farmers for alternative management practices. In our proposed mechanisms, individuals receive an assurance contract that offers qualified contributors an assurance payment as compensation in the event that total contributions fail to achieve the threshold needed to fund the public good. Contributors qualify by contracting to support provision with a minimum contribution. Our public good involves delaying the harvest of a ten-acre hayfield to allow grassland birds to nest successfully. Evidence from lab experiments shows that the provision probability, consumer surplus, and social welfare significantly increase when the assurance contract is present, while the producer surplus suffers from a slight decrease. Consistent with the theory and the lab experiment, we show that the individual contribution is determined by the value range and the assurance payment level in the pilot field experiment. Our proximate motivation is to support bird habitat provided by farmland, but our approach contributes to the private provision of ecosystem services and other types of public goods in general.
Farmers and Habits: The Challenge of Identifying the Sources of Persistence in Tillage Decisions
AbstractSurvey data reveal that farmers’ annual decisions about how to manage crop residues through tillage are highly persistent. On a given field, management tends to persist in one of three states: tillage, no-till production, or a mixed-tillage system that alternates annually between the two, but variation in weather, input prices, and government incentives for no-till does cause shifts between these states. In this research, an econometric analysis of satellite-based estimates of crop residue is used to estimate the persistence effect that results from receiving conservation program payments for no-till adoption. Identification of this effect comes from a natural experiment in how the program was implemented in the Northern High Plains. We then discuss four potential mechanisms behind observed persistence: unobserved heterogeneity in costs and benefits, physical capital and fixed transition costs, human capital and learning, or habits. Lastly, we present a hypothetical design of a field experiment within existing conservation programs to illustrate the possibility and difficulty of discerning between the potential mechanisms of persistence.
- Q1 - Agriculture