Atakelty Hailu

Are Auctions More Efficient Than Fixed Price Schemes When Bidders Learn

Auctions are increasingly being considered as a mechanism for allocating conservation contracts to private landowners. This interest is based on the widely held belief that competitive bidding helps minimize information rents. This study constructs an agent-based model to evaluate the long-term performance of conservation auctions under settings where bidders are allowed to learn from previous outcomes. The results clearly indicate that the efficiency benefits of one-shot auctions are quickly eroded under dynamic settings. Furthermore, the auction mechanism is not found to be superior to fixed payment schemes except when the latter involve the use of high prices.

Nonparametric productivity analysis with undesirable outputs : reply

Hailu and Veeman (2001) (henceforth HV) use both primal nonparametric (DEA) and dual nonparametric frontiers that include undesirable outputs. The dual frontier provides the tightest nonparametric outer-bound to the unknown underlying technology while the DEA frontier provides the tightest innerbound to the technology (Varian, Banker and Maindiratta, Chavas and Cox). All previous nonparametric analyses incorporating undesirable outputs had been based on the DEA model, and HV highlighted the limitations of this one-sided approach by confronting the results from the DEA model with those from the dual model. The DEA model was found to be very poor in terms of discriminating between observations. As indicated in HV, this is a problem that has also been noted by several other researchers in the conventional productivity literature. Before I provide specific responses to some of the comments by Fare and Grosskopf (FG), I would like to make the following general remarks. First, HV use input-based measures and a variable returns-to-scale formulation of the DEA model. However, FG support their arguments using output-possibility frontiers, output-based measures and constant returnsto-scaleassumptionsthatwerenotusedinHV. It is well known that a DEA model with constant returns to scale has different characteristics and provides different results compared to those with variable returns. Second, and more importantly, it should be noted that the DEA model with constant returns to scale does not qualify as the inner nonparametric bound that is the subject of HV’s article. Third, the major difference between the weakly disposable and HV DEA frontiers becomes irrelevant for measures of efficiency that explicitly penalize extrabadoutput.InFG’sfigure1,forexample, the area east of line bc is irrelevant in the HV

Testing for Allocation Efficiencies in Water Quality Tenders Across Catchments, Industries and Pollutants: A North Queensland Case Study

The design of competitive tenders to purchase environmental services requires judgements to be made about the funding scale and tender scope, with the latter incorporating considerations of geographic area, industries involved and the types of environmental outputs required. Increasing the scale and scope of tenders increases the likelihood that a larger range of proposals will be proposed and cost-effective ones selected. However, the use of larger and more broadly scoped tenders may reduce landholder participation and increase asking bids. In the study reported here, these issues have been tested with a single water quality tender run in north-eastern Australia in 2007 and 2008. Post hoc tests and workshop exercises show that while largerscale and scope tenders can generate efficiency gains, care has to be taken to maintain participation and avoid higher bid levels

Economic valuation of recreational fishing in Western Australia: statewide random utility modelling of fishing site choice behaviour

Allocation of fish resources is a controversial subject. This is partly because of our limited understanding of the values of fishing opportunities. This study investigates fishing site choices in Western Australia using national survey data covering eight major fishing regions and forty‐eight fishing sites. We estimate a random utility model (RUM) of site choice with a supporting negative binomial model of angler‐specific expected catch rates. Value estimates for fish types, fishing site attribute changes and access values are presented and discussed.

Event-specific data envelopment models and efficiency analysis

Most, if not all, production technologies are stochastic. This article demonstrates how data envelopment analysis (DEA) methods can be adapted to accommodate stochastic elements in a state-contingent setting. Specifically, we show how observations on a random input, not under the control of the producer and not known at the time that variable input decisions are made, can be used to partition the state space in a fashion that permits DEA models to approximate an event-specific production technology. The approach proposed in this article uses observed data on random inputs and is easy to implement. After developing the event-specific DEA representation, we apply it to a data set for Western Australian barley production data. Our results highlight the need for acknowledging stochastic elements in efficiency analysis.

Designing Multi-unit Multiple Bid Auctions: An Agent-based Computational Model of Uniform, Discriminatory and Generalised Vickrey Auctions

Multi-unit auctions are being used by public agencies to allocate resources and to purchase services. These auctions resolve the lumpy bid problem inherent in single-bid auctions by allowing bidders to submit a supply or demand schedule. However, the choice of pricing formats for multi-unit auctions is controversial. Neither economic theory nor laboratory experiments depict a complete picture of how alternative pricing formats perform in terms of budgetary or allocative efficiency. This paper constructs an agent-based computational model to compare uniform, discriminatory and generalised Vickrey pricing formats under different degrees of competition and heterogeneity in the bidder population.

Learning in a “Basket of Crabs”: An Agent-Based Computational Model of Repeated Conservation Auctions

Auctions are increasingly being considered as a mechanism for allocating conservation contracts to private landowners. This interest is based on the widely held belief that competitive bidding helps minimize information rents. This study constructs an agent-based model to evaluate the long term performance of conservation auctions under settings where bidders are allowed to learn from previous outcomes. The results clearly indicate that the efficiency benefits of one-shot auctions are quickly eroded under dynamic settings. Furthermore, the auction mechanism is not found to be superior to fixed payment schemes except when the latter involve the use of high prices.

Integrating Recreational Fishing Behaviour within a Reef Ecosystem as a Platform for Evaluating Management Strategies

The management of recreational fishing is a controversial subject in most jurisdictions. On the one hand, recreational fishing provides substantial economic benefits. Fishing activities, on the other hand, can threaten valuable fish stocks and cause damage to marine environments. However, most management strategies undertaken so far tend to be ad hoc and not supported by proper modeling. To address this, this paper proposes an integrated agent-based model of recreational fishing and a coral reef environment as a platform to evaluate both the economic and biophysical impacts. The platform is used to evaluate the effects of an incentive-based scheme for the management of recreational fishing in coral reef environment. A negative incentive in the form of fish extraction fee is evaluated. Simulation of fish extraction fees indicate that high value fish biomass can be increased substantially when fish extraction fees are pushed to a certain critical but narrow range. Anglers benefit from high catch rates and this compensation dampens the degree of economic welfare loss among anglers. The results from the simulations demonstrate the extent to which the often controversial subject of recreational fishing management can be facilitated using integrated modeling.

Research note: recreational trip timing and duration prediction.

This paper presents models that predict two recreational fishing trip parameters: the length of a trip and the timing of a trip within a year. A discrete choice (logit) model – linking the choice of trip timing to calendar events, the demographic characteristics of anglers and the nature of the trip – is estimated econometrically. A Tobit model is used to evaluate the effects on fishing trip length of personal and trip characteristics. The results indicate that timing choice and trip length can be explained well in terms of observable personal and trip variables. Knowledge of these relationships is a useful input to tourism/recreational fishing management, as well as to the development of tourism/fishing activity simulation models.

Combinatorial Auction Designs for Biodiversity Conservation

A conservation auction is a tender mechanism for allocating project contracts among landholders for undertaking environmental conservation activities. Typically, environmental indices (EIs) are used to combine multiple project benefits into an overall score for selecting successful projects. However, higher flexibility and efficiency can be achieved by allowing bidders to offer different combinations of conservation benefits where projects are evaluated directly in terms of their multiple outcomes. Combinatorial auctions that allow bidders to express their preferences for a combination of projects can be attractive. In this article, we discuss three major features of combinatorial auction designs that would be useful in conservation: submission of multiple projects by individual bidders, consideration of cost complementarities by individual bidders, and flexibility in project evaluation by the auctioneer. Using a stylized simulation experiment, we quantify and demonstrate the benefits of these features for some hypothetical conservation situations.