Gregory M. Parkhurst

Agglomeration bonus: an incentive mechanism to reunite fragmented habitat for biodiversity conservation

This paper examines an experiment conducted to explore a voluntary incentive mechanism, the agglomeration bonus, designed to protect endangered species and biodiversity by reuniting fragmented habitat across private land. The goal is to maximize habitat protection and minimize landowner resentment. The agglomeration bonus mechanism pays an extra bonus for every acre a landowner retires that borders on any other retired acre. The mechanism provides incentive for non-cooperative landowners to voluntarily create a contiguous reserve across their common border. A government agency’s role is to target the critical habitat, to integrate the agglomeration bonus into the compensation package, and to provide landowners the unconditional freedom to choose which acres to retire. The downside with the bonus, however, is that multiple Nash equilibria exist, which can be ranked by the level of habitat fragmentation. Our lab results show that a no-bonus mechanism always created fragmented habitat, whereas with the bonus, players found the first-best habitat reserve. Once pre-play communication and random pairings was introduced, players found the first-best outcome in nearly 92% of play.

Integrating economics and ecology to protect nature on private lands: models, methods, and mindsets

Protecting nature on private lands presents both a challenge and an opportunity. The challenge is to protect both private landowner concerns and the biological needs of the environment; the opportunity is the need to better integrate the disciplines of ecology and economics. Such integration offers scientists the prospect of gaining more understanding about the complexities that arise in the protection of human-dominated environments. Integration also can help policy-makers make more informed decisions about how to manage private lands by adding insight into the efficacy and efficiency of alternative choices that try to balance private rights with the public gains. Integration occurs at several different levels, ranging from accounting for feedbacks between both economics and ecology within formal models to incorporating diverse methods of control to link the multiple objectives of various interest groups and people. In this paper, we discuss three illustrative examples of integration—models, methods, and mindsets—that show how one can combine economics and ecology to address the challenge of protecting nature on private lands. We explore how the explicit process of connecting disciplines can help create and refine economic incentive mechanisms that satisfy the goals set by biological needs, landowner choices, and political realities.

The initial endowment effect in experimental auctions revisited: further evidence

This analysis employs a uniform 4th price sealed-bid auction to test the impact of endowment heterogeneity on participant bids. A mechanism to legitimize the wealth of participants consistent with prior research on endowments is employed. Second, unlike some previous literature, a mechanism to endogenously induce endowment heterogeneity is employed. Results from a Tobit analysis of participant bids indicate that endowment heterogeneity has no significant impact on bidding behaviour. Therefore, it is concluded that when wealth is legitimized within an experiment, bidding behaviour is more likely rational leading to more robust experimental results.

Repetition, Communication, and Coordination Failure

We examine repetition as an institution that affects coordination failure in a game with and without pre-play communication. We use probit regression with random effects to test hypotheses regarding the frequency and form of coordination failure in the presence of repeated play versus one-shot games. Our results indicate that repetition without pre-play communication results in a lower frequency of coordination failure relative to one-shot game outcomes. This result is reversed when pre-play communication is allowed. Our evidence also suggests that repeated play coordination failures tend to be suboptimal Nash equilibria, whereas one-shot game coordination failures are disequilibria regardless of the presence of pre-play communication.

Does complexity reduce coordination

Herein it is shown that increased complexity does not necessarily imply more coordination failure. Experienced people playing a 4-player spatial grid game with over 68 000 strategy choices and (68 000)4 potential outcomes were as likely to find the Pareto dominant Nash equilibrium as in a corresponding normal form game.

Experimental Economics and the Environment: Eliciting Values for Controversial Goods

We illustrate the experimental method by examining bidding behavior for controversial goods, i.e., goods in which bidders have positive and negative values. Our results suggest that bidding behavior differs across auction type. Bidders with positive induced values bid sincerely in a WTP auction. Bidders bid conservatively, however, in the WTA auction, foregoing profitable opportunities. Informing bidders of their optimal strategy serves to attenuate bidding discrepancies but does not eliminate them. Treating the WTP and WTA auctions as equivalent given positive and negative values could lead one to overstate the costs relative to the benefits of the controversial good.