This study compares the fiscal efficiency of two types of reverse auctions, uniform-price and discriminatory-price, for the purchase of ecosystem services (PES) under different structures of information. Public agencies that conduct reverse PES auctions traditionally provide public information such as the budget and the accepted bids in past rounds. The experimental results from 180 participants suggest that providing varying levels of public information affects both seller behavior and auction efficiency, as measured by the limitation of rents. In this controlled setting, the most efficient auction is found to be a discriminatory-price auction with partial information. This auction produced efficiency gains of 7% of the experimental conservation budget and roughly 25% lower rents than the other auction-information treatments.
The Effect of Information on Discriminatory-Price and Uniform-Price Reverse Auction Efficiency: An Experimental Economics Study of the Purchase of Ecosystem Services Available to Purchase
Funding for this research was provided by the U.S. Department of Agriculture’s Economic Research Service (ID#58-6000-7-0089). The authors appreciate Marca Weinberg and Dan Hellerstein for their support and feedback on earlier versions of this paper. We also appreciate research assistance from Robin Dillaway, Jacob Fooks, Julia Parker, and Jubo Yan. The views expressed here are those of the authors and cannot be attributed to ERS or the U.S. Department of Agriculture.
Duke JM, Messer KD, Lynch L, Li T (2017), "The Effect of Information on Discriminatory-Price and Uniform-Price Reverse Auction Efficiency: An Experimental Economics Study of the Purchase of Ecosystem Services". Strategic Behavior and the Environment, Vol. 7 No. 1-2 pp. 41–71, doi: https://doi.org/10.1561/102.00000073
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