Designing experiments to test auction procedures

This report is the second 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 this 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 system where competing proposals for corridor locations are evaluated for potential funding. There are several ways that an auction or tender system can be designed to employ a competitive process to allocate public funding for corridor establishment. To identify the most appropriate mechanisms, a series of experimental workshops have been designed where landholders will be asked to indicate potential corridors and required annual incentive payments on maps of ‘dummy’ or ‘mock’ properties. ‘Dummy’ properties are being used as a way of controlling and limiting the influence of a number of variables. In this way the relevant opportunity cost and transaction cost variables can be related to the bid amounts in the workshops. Two trials have been held of the experimental workshop process, and the insights from those trials have been used to improve the procedures. The main workshops will be formed of two components. In the first, workshop participants will be asked to design and lodge bids for within-property corridors. In the second, groups of participants will be asked to identify suitable corridors, and then lodge individual bids for the required payment levels.