Designing auctions with landholder cooperation: Results from experimental workshops

This report is the fourth of a series of reports detailing the outcomes of a research project based in the Desert Uplands region of central-western Queensland. The aim of the project is to demonstrate to government that public and/or private funds can be efficiently allocated for vegetation corridor protection through voluntary engagement with landholders. The mechanism to demonstrate is a type of auction (competitive tendering) system where competing proposals for corridor locations are evaluated for potential funding. The focus of the research project is to evaluate different auction mechanisms that encourage cooperative outcomes in a competitive tendering environment. A series of experimental workshops were held with landholders in the Desert Uplands region, to test the design of a suitable auction format. The results from these workshops are presented in this report. The workshops were divided into two sessions. The first focused on multiple individual bidding rounds. The main aim in these rounds was to familiarize landholders with the process, identify the monetary tradeoffs associated with setting aside conservation blocks, examine the strategies used between bidding rounds and to determine if competitive pressure would drive down the relative bid values. In the second session of the workshops two different bidding formats were tested to develop a suitable auction design when collaboration between participants is required to achieve a particular outcome – in this case, the formation of a vegetation corridor. First, a format of group bids was tested and second, a two stage (bid/rebid) individual bidding system was tried. An experimental workshop design (with landholders as participants), was favoured over the more common use of laboratory experiments (usually with students as participants) as the method of testing auction design. It was important to gather information (that only local landholders would have), about the costs of management changes, and about their attitudes to, and behaviour in, a competitive tender process. Some useful insights into the relative advantages of an experimental workshop over a laboratory experiment are presented in the report, as well as some of the tradeoffs.