Using Field Experiments to Explore the Use of Multiple Bidding Rounds in Conservation Auctions

Conservation auctions such as the Conservation Reserve Program in the United States and the BushTender Program in Australia have been used to identify landholders who can provide on-farm conservation and biodiversity protection actions at lowest cost. These conservation auctions are typically framed as closed, discriminatory, single round, first-price auctions, and are based on the assumption that landholders will offer bids determined by their 'independent private values'. However bid values may also be influenced by other factors such as concerns about 'winner's curse', a desire to capture economic rent, and premiums for risk and uncertainty factors. Sealed, single round auctions may exacerbate information gaps and uncertainty factors because of the limited information flows compared to traditional market exchanges and open, ascending auctions. In this paper, the cost-efficiencies of a multiple round auction for landholder management actions are explored with the use of field experiments. Results suggest that multiple round auctions may be associated with efficiency gains, particularly in initial rounds. However, multiple round auctions can also involve higher transaction and administration costs, so the net advantages need to be assessed on a case by case basis before these are used to purchase environmental services.