Wildlife corridor market design: An experimental analysis of the impact of project selection criteria and bidding flexibility

In this work we used controlled laboratory experiments to investigate the impact of project selection criteria and bidding flexibility on the economic performance of wildlife corridor auctions. Bidders coordinated their bids to form valid corridors and compete with other valid corridors to be successful. We tested the impact of bidding flexibility in terms of (a) bidders differentiating their offers for different eligible corridors and (b) bidders submitting a single offer that would automatically be considered for all eligible corridors. Within the bidding options, we compared the performance of the auctions under a net benefit and a benefit cost ratio selection criteria. We found that participants conditioned their offers in terms of corridor benefit information. As a consequence, allowing multiple offers significantly increased payment and rent extraction. On the other hand, a single offer restriction facilitated a higher proportion of valid agreements and reduced rent extraction and, as a result, the agency's payment. We could not find any significant difference between project selection criteria in terms of payment and rent extraction. These results provide important insights for policy makers engaged in conservation market design throughout the world. (C) 2014 Elsevier B.V. All rights reserved.