Reverse Auctions for Agri-Environmental Improvements: Bid-Selection Rules and Pricing for Beneficial Management Practice Adoption

Abstract

This study uses experimental economic methods to examine the efficacy of reverse auctions to generate efficient nutrient abatement from livestock operations. The experimental parameters were benchmarked to a specific beneficial management practice in a Manitoba watershed and were used to examine three bid-selection rules and two pricing rules. The results suggest that targeting livestock with the practice performed almost as well as targeting specific abatement levels at the farm level. Auctions that maximized participation of producers fared poorly on both environmental and economic outcome measures. The uniform-price rule was found to be superior to the discriminative-pricing rule.