Steven Schilizzi

As an alternative to the more traditional fixed-price schemes, governments can run auctions to purchase environmental services from private agents. Governments have so far chosen the discriminatory price (DP) over the uniform price (UP) format. Theoretical and experimental studies have concluded that the DP usually performs better than the UP in terms of cost-effectiveness. Using field data from two fishing

The demand for bottled water has increased rapidly over the past decade, but bottled water is extremely costly compared to tap water. The convenience of bottled water surely matters to consumers, but are others factors at work? This manuscript examines whether purchases of bottled water are associated with the perceived risk of tap water. All of the past studies on bottled water consumption have used simple scale measures of perceived risk that do not correspond to risk measures used by risk analysts. We elicit a probability-based measure of risk and find that as perceived risks rise, expenditures for bottled water rise.

We examine the problem of signaling the quality of goods and services when quality is never observable to consumers. The solution to this problem is certication, which acts to transform unobservable credence attributes into observable search attributes. We study the impact of cer- tication systems on market structure and performance. It turns out that the costs of certication, sunk in order to achieve credibility, play a key role in producing an oligopolistic market. We next show that since it involves increasing return to scale, certication is better achieved by an independent

Policy makers aiming to get private landholders to supply non-marketed environmental services may need to provide efficient economic incentives. Two ideas have been explored to achieve this: linking contract payments to environmental outcomes and submitting the contracts to competitive tender. This paper investigates whether there are any gains to be had by combining the potential benefits of both approaches. Landholders’ risk aversion to only partially controlled outcomes may offset incentive effects if the fall in participation outweighs any increases in individual effort. Controlled lab experiments were designed on the basis of a theoretical model and were run in two countries, with varying rates of payments linked to environmental outcomes. Results suggest that it can be counterproductive in terms of expected environmental outcomes to combine tenders with incentive payments, especially when the target population is known to be risk-averse.

Policies introduced to address one environmental objective can often have the side-benefit of also addressing other environmental objectives. This analysis uses a whole farm bioeconomic model to explore the farm level implications, economic and environmental, of a policy initially designed to reduce greenhouse emissions. We model a regulatory policy which imposes an upper limit on farm greenhouse emissions but allows trees to be used as carbon sinks to offset emissions. The implementation of this policy causes a reduction in whole farm profit, but in addition to decreasing emissions it also decreases groundwater recharge from the farming system and therefore contributes to the prevention of dryland salinity. The analysis compares this approach with using a recharge restriction policy to achieve recharge and emissions reductions. The analysis finds that the position of trees in the landscape affects the extent to which groundwater recharge can be reduced for a given reduction in emis...

Der vorliegende Artikel untersucht die Effizienz unterschiedlicher Ausgestaltungen von Auktionen zur Auswahl von Landwirten an Umweltprogrammen mittels eines ökonomischen Experimentes. Es wird eine Preisauktion, bei der die Leistung des Landwirts fixiert ist und er ein monetäres Mindestgebot für ein Teilnahmeentgelt abgeben soll, mit zwei unterschiedlichen Mengenauktionen verglichen, bei denen die Entgeltzahlung für den Landwirt fixiert ist und er aus unterschiedlichen Maßnahmen mit unterschiedlicher Leistung ein Angebotsbündel zusammenstellen soll. In der ersten Auktionsrunde ist die Leistung (=Stickstoffreduktion) je Euro Teilnahmeentgelt bei der Preisauktion signifikant höher als für die Mengenauktionen. Allerdings sind die Lerneffekte zwischen den Runden in der Preisauktion signifikant, so dass in der dritten Runde keine signifikanten Unterschiede zwischen den Auktionen mehr nachgewiesen werden können. Fur selten wiederkehrende, z.B. langfristige Nutzu...

The results of this analysis show that a long-term tree crop plantation is effective at reducing carbon emissions from a predominantly grazing farming system. However, if the plantations are destumped, much of the carbon will be returned to the atmosphere in time, in which case benefits are confined to their ability to ‘buy time’ for the development of less-polluting technologies. The accreditation of commercial tree crops may provide a socially and politically feasible solution for medium-term environmental policy. The benefits of the policy would be strengthened if implemented in conjunction with salinity abatement policy.

A Choice Modelling (CM) experiment is developed with the purpose of gaining some insight on how to identify the relevant population for the valuation of an environmental asset. The experiment is based on a survey of Perth residents over the values they attach to Kings Park, the largest urban park in Western Australia, 4/5 of which is native bushland. We design the experiment in order to isolate NUVs form UVs so that trade-offs between attributes of the asset imply tradeoffs between Use Values, Non-Use Values and money. One can then estimate the coefficients for each attribute and analyse the effect of distance on patterns of use. Preliminary results are obtained using data from a pre-survey trial of the questionnaire.

Building on available theory, this work uses controlled laboratory experiments to investigate the budgetary and the economic performance of competitive tenders for allocating conservation contracts to landholders. Experiments have been replicated in two different countries to check for robustness of results. We find that auctions outperform the more traditional fixed-price schemes only in the one-shot setting. With repetition, the auctions quickly lose their edge. Our results suggest that previous estimates of conservation auction performance are too optimistic.

Three policy options for greenhouse gas abatement in the predominantly grazing systems of Western Australia are analysed. The two taxation policies (a tax on total emissions, and a tax on methane emissions only) are only effective at extreme tax rates ($85/t CO2 equivalents) where the farming systems are economically unviable. The third policy option, emission restrictions, allows the farm to remain profitable at approximately four times greater abatement levels than the taxation policies, and is found to be the most effective and efficient policy option studied. However, it is concluded that the introduction of any farm-level policy for greenhouse gas abatement would be politically unpopular and, in the absence of swift and innovative technological change, would cause the current farming systems to fail and be replaced by alternative land-uses.

Corruption in the public sector erodes tax compliance and leads to higher tax evasion. Moreover, corrupt public officials abuse their public power to extort bribes from the private agents. In both types of interaction with the public sector, the private agents are bound to face uncertainty with respect to their disposable incomes. To analyse effects of this uncertainty, a stochastic dynamic growth model with the public sector is examined. It is shown that deterministic excessive red tape and corruption deteriorate the growth potential through income redistribution and public sector inefficiencies. Most importantly, it is demonstrated that the increase in corruption via higher uncertainty exerts adverse effects on capital accumulation, thus leading to lower growth rates.

We examine under what conditions setting up a captive insurance company with reinsurance is an optimal solution for risk-averse firms when the insured firm, the insurer and the reinsurer do not know the probability distribution of some risks, and have conflicting estimates of this distribution.

Buying environmental services from private landholders using tendering mechanisms are usually subject to a budget constraint. Auction theory has mostly focused on target-constrained auctions and is less well developed for this type of auction. This paper examines a theoretical model specifically developed for budget-constrained tenders and assesses its capacity to predict tendering performance under information limitations typical of those found in field applications. But this assessment cannot be done without complementing the model with controlled laboratory experiments. Subject to their external validity, we find that the model is able to make the correct policy recommendation when comparing the tender to an equivalent fixed price scheme, even when the accuracy of its prediction is far from perfect. However, the study suggests that more than a single point estimate of bidders’ costs is needed for this to happen, indicating that it should be worthwhile for policy administrators to...

Policy makers aiming to get private landholders to provide non-marketed environmental services need to provide efficient economic incentives. Two ideas have been explored to achieve this: linking contract payments to environmental outcomes and putting the contracts up for tender. This paper investigates whether there are any gains to be had by combining the benefits of both approaches. Landholder risk aversion may offset incentive effects if the fall in participation outweighs any increases in individual effort. Using controlled lab experiments in two countries and across four subject groups, and systematically varying the rate at which payments are linked to uncertain outcomes, this paper clarifies the conditions under which incentives overcome risk-aversion – a parameter which was also measured. Results show that for risk averse landholders the most efficient approach is in general to tender contracts only moderately linked to environmental outcomes – that is, using a balanced com...

This paper explores two ideas to enhance the performance of agri-environmental contracting schemes: linking contract payments to environmental outcomes and putting the contracts up for tender. This paper investigates whether there are any gains to be had by combining the benefits of both approaches. Controlled lab experiments were run in two countries, systematically varying the rate at which payments are linked to environmental outcomes. This paper clarifies the conditions under which the benefits from combining tenders with incentive payments outweigh the costs.

As an alternative to the more traditional fixed-price schemes, governments can run auctions to purchase environmental services from private agents. Governments have so far chosen the discriminatory price (DP) over the uniform price (UP) format. Theoretical and experimental studies have concluded that the DP usually performs better than the UP in terms of cost-effectiveness. Using field data from two fishing

Conflicts of interest between irrigation and aquaculture in water use from reservoirs in Vietnam can be resolved when trade-offs in the economic value of water can be quantified over time. Determining these trade-offs can be used as a benchmark for making decisions about managing reservoirs tending to develop rural areas in Vietnam. To solve this problem, a stochastic dynamic programming model was constructed. This model maximizes the expected net present values generated by both agriculture and aquaculture by finding the optimal release paths throughout a year, under conditions of uncertain rainfall. The model was constructed using two main components. First, a dated water production function is used to evaluate responses of crop yields for different levels of applied irrigation. Second, a bio-economic model for reservoir fisheries is employed to estimate fish yields at different levels of water during a harvest season. Using this model, we present a case study of reservoir water m...

Policy makers in Vietnam face difficult choices when deciding reservoir water management strategies between irrigation and fisheries. In this paper, an economic optimization model for water management is developed to facilitate policy makers' decision making. The model includes the response of rice and fish yields to key factors including reservoir water levels, the timing and quantity of water release, and climatic conditions. The model accounts for variation in rainfall patterns, irrigation requirements, and the demand for low water levels during the fish harvest season. The model is applied to the Daton reservoir in the south of Vietnam to maximize profits in each of three production scenarios where the reservoir's water is used for: (1) only producing rice, (2) only producing fish, and (3) producing rice and fish. Key findings are: (1) for rice production, adequate water should be released to meet rice water requirement and residual water should be stored as a source of ...