Options for Improving Conservation Programs: Insights from Auction Theory and Economic Experiments

53 Pages Posted: 22 Feb 2016

See all articles by Daniel Hellerstein

Daniel Hellerstein

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS), Resource and Rural Economics Division

Nathaniel Alan Higgins

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Michael Roberts

University of Hawaii - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 15, 2016

Abstract

The U.S. Department of Agriculture spends over $5 billion per year on conservation programs, mostly on voluntary programs that give financial assistance to farmers and landowners to provide environmental services (such as implementing nutrient management programs or planting native grasses). Since most programs cannot fund all interested parties, program managers must use some mechanism to select applicants. One option is to elicit offers through an auction. This report addresses the use of auctions in conservation programs. It considers how information in the hands of Government officials and rural landowners affects the auction’s performance, and how auction design can reduce Government expenditures or encourage landowners to provide greater environmental services. Results of laboratory experiments are discussed, highlighting shortcomings of common features of conservation program auctions (such as limits on the rent landowners may request), as well as how alternative auction designs can improve performance.

Keywords: Conservation Reserve Program, CRP, auctions, enrollment mechanisms, bid caps, reference-price auction, quota auction

JEL Classification: C91, D44, C24, C28

Suggested Citation

Hellerstein, Daniel and Higgins, Nathaniel Alan and Roberts, Michael, Options for Improving Conservation Programs: Insights from Auction Theory and Economic Experiments (January 15, 2016). Economic Research Service, Paper No. ERR 181, January 2015. Available at SSRN: https://ssrn.com/abstract=2735031

Daniel Hellerstein (Contact Author)

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS), Resource and Rural Economics Division ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
202-694-5613 (Phone)
202-694-5756 (Fax)

Nathaniel Alan Higgins

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States
(202) 694-5602 (Phone)

Michael Roberts

University of Hawaii - Department of Economics ( email )

Honolulu, HI 96822
United States

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