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Auctioning conservation contracts in the presence of externalities

Calel, Raphael (2010) Auctioning conservation contracts in the presence of externalities. Centre for Climate Change Economics and Policy and Grantham Research Institute on Climate Change and the Environment, 22. Centre for Climate Change Economics and Policy and Grantham Research Institute on Climate Change and the Environment, London, UK.

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Abstract

Current models of conservation auctions do not permit for the presence of environmental externalities and synergies between bidders. Yet, conservation auctions are usually set up for the very purpose of addressing problems associated with environmental externalities. Clearly, our models do not tell the whole story, and they consequently fail to identify waste and inefficiency in these auctions. Our paper shows how externalities between bidders can be incorporated into our models of conservation auctions, and uses this framework to investigate the cost-efficiency of the uniform-price auction when neighbours can bid jointly. Allowing neighbours to bid jointly allows them to internalise these externalities, but also reduces the competitiveness of the auction. The net effect on cost-efficiency is ambiguous, so we show how simulation can be used to determine in what circumstances joint bidding can be expected to reduce the payments needed to secure a given amount of ecosystem services.

Item Type: Monograph (Working Paper)
Official URL: http://www2.lse.ac.uk/GranthamInstitute/Home.aspx
Additional Information: © 2010 The Author
Library of Congress subject classification: G Geography. Anthropology. Recreation > GE Environmental Sciences
H Social Sciences > HC Economic History and Conditions
Journal of Economic Literature Classification System: D - Microeconomics > D4 - Market Structure and Pricing > D44 - Auctions
H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q1 - Agriculture > Q19 - Other
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q5 - Environmental Economics > Q57 - Ecological Economics: Ecosystem Services; Biodiversity Conservation; Bioeconomics
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 22
Date Deposited: 13 Jul 2011 14:22
URL: http://eprints.lse.ac.uk/37395/

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