Universität zu Köln

Cramton, Peter ORCID: 0000-0001-8621-1092, Hellerstein, Daniel, Higgins, Nathaniel, Iovanna, Richard, Lopez-Vargas, Kristian and Wallander, Steven (2021). Improving the cost-effectiveness of the Conservation Reserve Program: A laboratory study*. J.Environ.Econ.Manage., 108. SAN DIEGO: ACADEMIC PRESS INC ELSEVIER SCIENCE. ISSN 1096-0449

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Abstract

The Conservation Reserve Program (CRP) is arguably the world's largest payments-for ecosystem services program, with $1.8 billion paid to farmers in 2017 for practices on 23.4 million acres. The CRP uses a pay-as-bid, reverse auction with field-specific price caps to enroll most of the land in the program. Economic theory and empirical studies from other domains suggest that the restrictive price-cap auction format used in the current design of the CRP exhibits issues in terms of efficiency and cost-effectiveness. Using a laboratory experiment, we study the impact of varying the tightness of the price-cap auctions. We also examine two alternative auction formats based on reference prices. We find that excessively tight bid caps reduce efficiency and cost effectiveness by discouraging participation. Conversely, bid caps set too high also reduce cost-effectiveness by allowing higher rents. An exogenous reference price ranking format, which makes medium-cost sellers more competitive against low-cost sellers, reduces both efficiency and cost-effectiveness. An endogenous reference price format increases cost-effectiveness by increasing participation and reducing rents. (c) 2021 Published by Elsevier Inc.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Cramton, Peter UNSPECIFIED orcid.org/0000-0001-8621-1092 UNSPECIFIED Hellerstein, Daniel UNSPECIFIED UNSPECIFIED UNSPECIFIED Higgins, Nathaniel UNSPECIFIED UNSPECIFIED UNSPECIFIED Iovanna, Richard UNSPECIFIED UNSPECIFIED UNSPECIFIED Lopez-Vargas, Kristian UNSPECIFIED UNSPECIFIED UNSPECIFIED Wallander, Steven UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-594524
DOI:	10.1016/j.jeem.2021.102439
Journal or Publication Title:	J.Environ.Econ.Manage.
Volume:	108
Date:	2021
Publisher:	ACADEMIC PRESS INC ELSEVIER SCIENCE
Place of Publication:	SAN DIEGO
ISSN:	1096-0449
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language AUCTIONS; PERFORMANCE; EXPERIENCE; PRICES Multiple languages Business; Economics; Environmental Studies Multiple languages
URI:	http://kups.ub.uni-koeln.de/id/eprint/59452