Abstract

Agri-Environmental Schemes are individual contracts in which voluntary farmers receive payments from an environmental agency to implement specific conservation measures to preserve or restore the environment. To achieve greater budgetary efficiency, auctioning conservation contracts have often been promoted in literature, and even implemented in some countries, as an alternative to the widespread fixed payment schemes.
In such reverse auction, the agency can announce a target, i.e. the amount of contracts to be purchased , but it is quite common in practice that a budget is announced, i.e. the maximum budget to be spent to purchase the maximum amount of contracts. Surprisingly, the question of how the announced constraint affects the efficiency of conservation auctions remains under studied to date.
We propose numerical simulations and a decontextualized experimental protocol based on the Strategy Method to shade some light on this gap in the auction literature.
We find that it is more efficient from the environmental agency’s perspective to announce a budget constraint than a target constraint in a reverse auction.

Practical information