Conservation auctions for landscape-scale environmental management: Does spatial configuration matter for economic and ecological outcomes?

Abstract

How best to achieve spatially-coordinated environmental outcomes using reverse auctions has become a research question of growing interest. This paper makes a first attempt to systematically investigate the combined effects of the spatial configuration of landscape and landholder-to-landholder communication on auction performance in delivering landscape-scale environmental improvements. We provide novel insights into the importance of the regulator's knowledge about landscape configuration when implementing auctions for landscape-scale environmental management. Using lab experiments, we vary the spatial correlations of opportunity costs and environmental benefits (positive, negative, no correlation) and the availability of costly communication in stylized agricultural landscapes, where the environmental goal is to establish corridors and stepping stones to facilitate the movement of wildlife species. Results show that bidding behaviour, the degree of spatial coordination and cost-effectiveness are significantly different across these three types of landscape configuration. Auctions perform worst in landscapes where opportunity costs and environmental benefits are negatively correlated. Communication promotes spatially-coordinated conservation effort, but its effects on bidding behaviour depend on landscape configuration. The interplay of a positive spatial correlation with communication was found to best promote spatial coordination, although willingness to incur communication costs by landholders varies with landscape configuration.