Additionality and Asymmetric Information in Environmental Markets: Evidence from Conservation Auctions
Anna Russo, Harvard University
Market mechanisms aim to reduce environmental degradation at low cost, but they are undermined when participants’ conservation actions are not marginal to the incentive — or “additional” — as the lowest-cost participants may not be the highest social value. We investigate this challenge in the Conservation Reserve Program’s auction mechanism for ecosystem services, linking bids to satellite-derived land use. Three-quarters of marginal auction winners are not additional. The heterogeneity in counterfactual land use introduces adverse selection. We develop a model of bidding and additionality to quantify welfare implications. Alternative auctions increase efficiency by using scoring rules that incorporate expected land use impacts.
| Building: | Lorch Hall |
|---|---|
| Website: | |
| Event Type: | Workshop / Seminar |
| Tags: | Economics, Industrial Organization, seminar |
| Source: | Happening @ Michigan from Department of Economics, Applied Microeconomics/Industrial Organization, Department of Economics Seminars |
