Experimental Testbeds for ECOSEL: A Market Framework for Private Provision of Forest Ecosystem Services

We attempt to design a market framework (which we call ECOSEL) for private provision of forest ecosystem services. ECOSEL is a non-regulatory framework that uses a voluntary public good provision mechanism (in a form of an auction) in conjunction with a multiobjective optimization algorithm to create a market for forest ecosystem services. It is expected to be attractive to the demand side of the ecosystem service market since only Pareto-efficient bundles of services are offered for auction, and it is expected to be attractive to the supply side as well by creating a source of non-timber income for forest landowners. ECOSEL is capable of flexible response to demand for other relevant dimensions of forest-related environmental amenities such as biodiversity, viewshed or recreational services. Following Roth’s (2002) advice on behavior of economists as “market engineers”, we use both experimental economics to improve the design of the ecosystem services market. Concurrently, we provide experimental evidence on the efficiency and revenue-generating properties of a multi-good subscription game of incomplete information.