An Agent Based Analysis of Combinatorial Bidding for Spatially Targeted Multi-Objective Environmental Programs

Abstract

Establishing national corridors have been identified as a policy priority for environmental and biodiversity conservation in many parts of the world. We explore the performance of a combinatorial landscape auction design to establish environmental corridors using an agent based simulation model. This modelling technique is highly flexible in modelling decision making processes involving heterogeneous landholders. Such structures allow landholders the opportunity to submit joint bids and, as such, share in the benefits that synergies across the landscape provide. The contribution of the paper is threefold. First, we compare spatial and non-spatial project selection to observe whether it is possible to achieve corridor outcomes with a non-spatially targeted project selection mechanism? We observe that while a corridor project selection mechanism increases the procurement cost, such selection mechanisms are necessary for spatially targeted objectives. Second, we study the effect of allowing agents to form coalitions and submit joint bids. We find evidence that joint bidding substantially increased procurement costs especially when the agency’s target was to secure environmental corridors. Third, we study the combined effect of off-site synergies and joint bidding. We observe that relative benefits from off-site synergy are higher in spatial targeting programs compared to non-corridor targeting programs.