Conservation Auctions and Compliance: Theory and Evidence from Laboratory Experiments |
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Authors: | Kentaro Kawasaki Takeshi Fujie Kentaro Koito Norikazu Inoue Hiroki Sasaki |
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Institution: | 1. Policy Research Institute, Ministry of Agriculture, Forestry and Fisheries (PRIMAFF), 3-1-1 Kasumigaseki, Chiyoda-ku, Tokyo, 100-0013, Japan 2. Research Center for Sustainability and Environment, Shiga University, Shiga, Japan 3. Department of Agricultural Economics, Rakuno Gakuen University, Hokkaido, Japan 4. Faculty of Life and Environmental Science, Shimane University, Shimane, Japan 5. Environment Policy Division, Ministry of Agriculture, Forestry and Fisheries, Tokyo, Japan
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Abstract: | Many agri-environmental conservation programs are faced with the problem of imperfect monitoring. This provides farmers with
an incentive for noncompliance, because they can receive subsidies without implementing the conservation scheme. In this paper,
bidding behavior and auction performance are compared for discriminatory-price and uniform-price auctions in an imperfect
monitoring environment. Our theoretical analysis suggests that auction performances are equalized between the discriminatory-price
and uniform-price auctions. However, laboratory experiments reveal that, although the discriminatory-price auction has an
advantage in terms of reducing policy costs, it is more likely to cause adverse selection. As a result, the uniform-price
auction tends to have higher efficiency and cost-effectiveness when compliance behavior is taken into account. |
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