The Impact of Information Provision on Agglomeration Bonus Performance: An Experimental Study on Local Networks

The agglomeration bonus is an incentive mechanism to induce adjacent landowners to spatially coordinate their land use for the delivery of ecosystem services from farmland. This paper uses laboratory experiments to explore the performance of the agglomeration bonus in achieving the socially optimal...

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Published inAmerican journal of agricultural economics Vol. 96; no. 4; pp. 1009 - 1029
Main Authors Banerjee, Simanti, de Vries, Frans P., Hanley, Nick, van Soest, Daan P.
Format Journal Article
LanguageEnglish
Published Malden Oxford University Press 01.07.2014
Blackwell Publishing Ltd
Subjects
Agglomeration
Agglomerationseffekt
Agrarboden
Agricultural economics
Agricultural land
Agricultural management
Biodiversity conservation
Coordination
Dissemination
Ecosystem services
Ecosystems
Efficient strategies
Farmlands
Farms
Information dissemination
Information sharing
Informationsökonomik
issues and policy
laboratory experimentation
Land management
Land use
Land use planning
Landowners
Local area networks
Nash equilibrium
Neighborhoods
Pay for performance
Räumliche Interaktion
Studies
Sustainable land management
Test
Ökologischer Landbau
Online AccessGet full text
ISSN0002-9092
1467-8276
DOI10.1093/ajae/aau048

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Summary:The agglomeration bonus is an incentive mechanism to induce adjacent landowners to spatially coordinate their land use for the delivery of ecosystem services from farmland. This paper uses laboratory experiments to explore the performance of the agglomeration bonus in achieving the socially optimal land management configuration in a local network environment where the information available to subjects varies and the strategic setting is unfavorable for efficient coordination. The experiments indicate that if subjects are informed about both their direct and indirect neighbors' actions, they are more likely to produce the socially optimal configuration. Thus effectiveness of the policy can be improved by implementing information dissemination exercises among landowners. However given the adverse strategic setting, increased game experience leads to coordination failure and optimal land choices only at the localized level independent of the information available to subjects. Thus success of the agglomeration bonus scheme on real landscapes will have to take account of the roles of both information and experience on participant behavior.
Bibliography:Simanti Banerjee is visiting assistant professor of economics in the Department of Economics, Oberlin College. Frans P. deVries & Nick Hanley are professors in the Division of Economics, Stirling Management School, University of Stirling. Daan P. van Soest is professor in the Department of Economics, Tilburg University. This research was funded by the European Investment Bank (EIB) under the EIB‐University Research Action Programme. The findings, interpretations, and conclusions presented in this article are entirely those of the authors and should not be attributed in any manner to the EIB. The authors thank editor David A. Hennessey, three anonymous referees, Mirko Moro, James Shortle, Anthony Kwasnica, and participants at the International Workshop on Mechanism Design and the Environment (Royal Society of Edinburgh, May 2013) for their insightful comments. Any errors remain those of the authors. Laboratory support for the experiments was provided by the Laboratory for Economics, Management, and Auctions (LEMA), Smeal College of Business, Pennsylvania State University.
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ISSN:0002-9092
1467-8276
DOI:10.1093/ajae/aau048