Conserving Spatially Explicit Benefits in Ecosystem Service Markets: Experimental Tests of Network Bonuses and Spatial Targeting

American Journal of Agricultural Economics, 1–21 (Jan 2016); doi: 10.1093/ajae/aav061

21 Pages Posted: 24 Feb 2016

See all articles by Jacob R. Fooks

Jacob R. Fooks

University of Delaware - Department of Applied Economics and Statistics

Nathaniel Alan Higgins

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

Kent D. Messer

University of Delaware - Department of Applied Economics and Statistics

Joshua M. Duke

University of Delaware - College of Agriculture & Natural Resources

Daniel Hellerstein

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

Lori Lynch

University of Maryland - Department of Agricultural & Resource Economics

Date Written: January 22, 2006

Abstract

Conserving contiguous areas often enhances environmental benefits. However, most conservation efforts are incentive-based and voluntary, and neither reward landowners for contiguity nor do they select based on contiguity. Thus, achieving optimal contiguity of conserved parcels is unlikely. Using lab and artefactual field experiments, this paper evaluates two mechanisms in the context of reverse auctions for achieving optimal contiguity: network bonuses and spatial targeting. Results suggest that spatial targeting alone improves the aggregate environmental and social welfare outcomes, while network bonuses alone result in worse outcomes. The interaction of the bonus effect and the targeting effect is positive. If a program was already using a competitive auction environment with bonuses, adding spatial targeting could reduce welfare loss.

Keywords: Agglomeration, contiguity, ecosystem service markets, experimental economics, network bonuses, reverse auctions, spatial targeting

JEL Classification: C9, Q2, Q57

Suggested Citation

Fooks, Jacob R. and Higgins, Nathaniel Alan and Messer, Kent D. and Duke, Joshua M. and Hellerstein, Daniel and Lynch, Lori, Conserving Spatially Explicit Benefits in Ecosystem Service Markets: Experimental Tests of Network Bonuses and Spatial Targeting (January 22, 2006). American Journal of Agricultural Economics, 1–21 (Jan 2016); doi: 10.1093/ajae/aav061 . Available at SSRN: https://ssrn.com/abstract=2736581

Jacob R. Fooks (Contact Author)

University of Delaware - Department of Applied Economics and Statistics

531 South College Ave
Newark, DE 19716
United States

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)

Kent D. Messer

University of Delaware - Department of Applied Economics and Statistics ( email )

531 South College Ave
Newark, DE 19716
United States

Joshua M. Duke

University of Delaware - College of Agriculture & Natural Resources ( email )

213 Townsend Hall
Newark, DE 19716
United States
302-831-2512 (Phone)
302-831-6243 (Fax)

Daniel Hellerstein

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)

Lori Lynch

University of Maryland - Department of Agricultural & Resource Economics ( email )

2112A Symons Hall
College Park, MD 20742-5535
United States
301-405-1264 (Phone)

HOME PAGE: http://www.arec.umd.edu/llynch/

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