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dc.contributor.authorOlita, Toto
dc.contributor.authorSchilizzi, Steven
dc.contributor.authorIftekhar, Sayed
dc.identifier.citationOlita, T. and Schilizzi, S. and Iftekhar, S. 2018. The influence of a conservation insurance mechanism on optimal bidding in risky conservation auctions, in The 6th World Congress of Environmental and Resource Economists, Jun 25-29 2018, Gothenburg, Sweden: WCERE.

Conservation auctions or tenders (CTs) are gaining popularity globally due to their ability to generate efficiency gains with limited public funding. However, the existence of various types of uncertainties, in particular, the cost of delivering environmental goods (own-cost uncertainties), can undermine the attractiveness of CTs as a conservation policy instrument. This paper uses the optimal bidding model to examine the bidding behaviour of risk-neutral and risk-averse bidders. We incorporate a security loading factor, which reflects a bidder's confidence in the data used to estimate the expected profit. The factor relates to the risk of facing the winner’s curse, that is, win the auction but experience higher than predicted cost. We then explore the impact of introducing an embedded insurance (a conservation insurance mechanism that is included in a successful conservation contract) on the expected profit as well as bidders' optimal bidding behaviour. We find that in the presence of own-cost uncertainty, the optimal bid rises due to the increased cost of participating in the auction. This is true for both risk-neutral and risk-averse bidders. However, in the presence of a conservation insurance mechanism the optimal bid reduces.

dc.subjectBidding theory
dc.subjectConservation tender
dc.subjectInsurance mechanism
dc.subjectOwn-cost uncertainty
dc.titleThe influence of a conservation insurance mechanism on optimal bidding in risky conservation auctions
dc.typeConference Paper
dcterms.source.conferenceThe 6th World Congress of Environmental and Resource Economists
dcterms.source.conference-start-date25 Jun 2018
dcterms.source.conferencelocationGothenburg, Sweden
curtin.departmentSchool of Molecular and Life Sciences (MLS)
curtin.accessStatusFulltext not available
curtin.facultyFaculty of Science and Engineering
curtin.contributor.orcidOlita, Toto [0000-0002-3247-3756]
dcterms.source.conference-end-date29 Jun 2018

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