RT Journal Article
SR Electronic
T1 Competition-Based Environmental Policy: An Analysis of Farmland Preservation in Maryland
JF Land Economics
JO Land Econ
FD University of Wisconsin Press
SP 555
OP 575
DO 10.3368/le.85.4.555
VO 85
IS 4
A1 John K. Horowitz
A1 Lori Lynch
A1 Andrew Stocking
YR 2009
UL http://le.uwpress.org/content/85/4/555.abstract
AB Policy makers have turned to competition-based voluntary-enrollment programs as a cost-effective way to achieve preferred land uses. This paper studies bidder behavior in an innovative auction-based program in which farmers compete to sell and retire the right to develop their land. We derive a reduced-form bidding model that includes private and common values. This model allows us to estimate the role of bidder competition, winner’s curse correction, and the underlying distribution of private values. We estimate that the auction enrolled as many as 3,000 acres (12%) more than a take-it-or-leave-it offer would have enrolled for the same budgetary cost. (JEL Q24, Q28)