4.2 Article

A laboratory comparison of uniform and discriminative price auctions for reducing non-point source pollution

Journal

LAND ECONOMICS
Volume 81, Issue 1, Pages 51-70

Publisher

UNIV WISCONSIN PRESS
DOI: 10.3368/le.81.1.51

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Auctions allow regulators to identify land management changes with substantial environmental benefit and low opportunity cost. This paper reports an experiment in which seller subjects compete in sealed-offer auctions to obtain part of a fixed budget allocated by the experimenter-regulator to subsidize pollution abatement. One treatment employs uniform-price auction rules, whereas another treatment employs discriminative price auction rules. We find that most offers in the uniform-price auction are within 2% of cost, whereas most offers in the discriminative price auction are at least 8% greater than cost. Nevertheless, the discriminative-price auction has superior overall market performance.

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