The impact of information provision on agglomeration bonus performance: An experimental study on local networks

Citation

Banerjee S, de Vries F, Hanley N & van Soest D (2014) The impact of information provision on agglomeration bonus performance: An experimental study on local networks. American Journal of Agricultural Economics, 96 (4), pp. 1009-1029. https://doi.org/10.1093/ajae/aau048

Abstract
The agglomeration bonus is an incentive mechanism to induce adjacent landowners to spatially coordinate their land use for the delivery of ecosystem services from farmland. This paper uses laboratory experiments to explore the performance of the agglomeration bonus in achieving the socially optimal land management configuration in a local network environment where the information available to subjects varies and the strategic setting is unfavorable for efficient coordination. The experiments indicate that if subjects are informed about both their direct and indirect neighbors' actions, they are more likely to produce the socially optimal configuration. Thus effectiveness of the policy can be improved by implementing information dissemination exercises among landowners. However given the adverse strategic setting, increased game experience leads to coordination failure and optimal land choices only at the localized level independent of the information available to subjects. Thus success of the agglomeration bonus scheme on real landscapes will have to take account of the roles of both information and experience on participant behavior.

Journal
American Journal of Agricultural Economics: Volume 96, Issue 4