When Does Public Information Undermine the Efficiency of Reverse Auctions for the Purchase of Ecosystem Services?
Date
2016-03
Journal Title
Journal ISSN
Volume Title
Publisher
Department of Applied Economics and Statistics, University of Delaware, Newark, DE.
Abstract
Government conservation agencies that conduct reverse auctions traditionally provide a significant amount of public information about past auction results. This information includes not only the amount of money spent by the government but also can include the number of offers received, number of offers accepted, highest accepted bid, lowest accepted bid, and the average accepted bid. This research uses induced-value experiments to evaluate the effect of past auction information on seller rent seeking. Results from 140 participants suggest that sellers use some public information to learn how to secure higher rents. However, when sellers are given information only about the buyers’ budget, they secure lower rents. Results also suggest that relative budget size affects rents and that budget variability in the presence of market information diminishes the effect. Thus, in the presence of public information and equivalent total outlays, variable budgets are more likely than stationary budgets to achieve conservation auction fiscal efficiency. Finally, this research finds that auctions with greater heterogeneity in seller opportunity costs are less fiscally efficient than when the distribution is more homogeneous.
Description
Keywords
Reverse auctions, Purchase of ecosystem services, Conservation auctions, Auction efficiency, Land preservation
Citation
Messer, K.D., J.M. Duke, L. Lynch, T. Li. 2016. “When Does Public Information Undermine the Efficiency of Reverse Auctions for the Purchases of Ecosystem Services?” Applied Economics & Statistics Research Report, University of Delaware, RR16-04.