Third party evaluation in conservation auctions

The past few decades have seen extensive amounts of budgets spent on the procurement of land-based environmental goods, as in public schemes such as the American Conservation Reserve Program and the Chinese counterpart, the Sloping Land Conversion Programme, as well as in private schemes such as the UK’s biodiversity offsetting market. These schemes typically pay private landholders for the provision of environmental benefits through changing land use practices such as restoring natural vegetation on rural land. The payments are often conditional on a third party’s evaluation of certain indicators or proxies of the environmental goods being delivered, where the third party’s position could be influenced if they are commissioned by private landholders seeking a favourable evaluation outcome to outcompete other suppliers of the environmental goods. Through a framed field experiment using Chinese farmer subjects, this study will for the first time investigate whether such environmental procurement may have different levels of conservation efficacy depending on the commission fees for third-party evaluators and the competition among them. Each experimental session will consist of four farmer subjects as ‘bidders’, each of whom will propose a rural land greening project in competition for a reward, and another two farmer participants as ‘referees’ evaluating the proposed projects at an evaluation fee paid by each bidder out of an endowment allocated to them by an experimenter. We will have two treatments that differ in the bidders’ flexibility in deciding the amount of the evaluation fee, which will allow us to examine the implications for auction performance. Moreover, we will have another treatment that mitigates the competition between the two referees, to assess whether the impacts of evaluation fees are less pronounced when the referees become less competitive. This study will make a unique contribution to the literature on conservation auctions and more generally to the literature on bribery and corruption in competitive procurement.