Conserving Spatially Explicit Benefits in Ecosystem Service Markets: Lab and Artefactual Field Tests of Network Bonuses and Spatial Targeting

Abstract

Conserving contiguous areas often enhances environmental benefits. However, most conservation efforts are voluntary, incentive-based, do not reward landowners for contiguity, or select based on contiguity. Thus, achieving optimal contiguity of conserved parcels is unlikely especially with limited budgets. Using laboratory and artefactual field experiments, this paper evaluates two mechanisms in the context of reverse auctions for achieving optimal contiguity: network bonuses and spatial targeting. Results suggest that spatial targeting alone improves the aggregate environmental and social welfare outcomes while network bonuses alone result in worse outcomes. The interaction of the bonus-effect and the targeting-effect is positive, suggesting that in a competitive auction environment that already includes bonuses, adding spatial targeting minimizes the damage.