Conservation tenders: linking theory and experiments for policy assessment

Authors

  • Steven Schilizzi,

  • Uwe Latacz-Lohmann

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    • Steven Schilizzi is at the School of Agricultural and Resource Economics, The University of Western Australia, Perth, WA 6009, Australia. Uwe Latacz-Lohmann (email: ulatacz@agric-econ.uni-kiel.de) is at the Department of Agricultural Economics, Christian-Albrechts University, Kiel, Germany.


  • The authors extend their gratitude to the University of Western Australia and to the Christian-Albrechts University of Kiel for having helped with the logistics of this study. Much was also made possible by time available for reciprocal sabbaticals at the CAU in 2010 and at the UWA during 2011.

Abstract

Auction theory has mostly focussed on target-constrained auctions and is less well developed for budget-constrained tenders, which are the norm in environmental policy. This study assesses a theoretical model developed for budget-constrained tenders in its capacity to predict tendering performance under information deficiencies typical of field applications. If complemented by laboratory experiments, the model is able to make the correct policy recommendation when comparing the tender to an equivalent fixed-price scheme, even with poor predictive accuracy. This holds even if the policymaker has only limited information on the model’s key input variables.

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