title: A revealed preference approach to estimating supply curves for ecosystem services: use of auctions to set payments for soil erosion control in Indonesia.
abstract: To supply ecosystem services, private landholders incur costs. Knowledge of these costs is critical for the design of conservation-payment programs. Estimating these costs accurately is difficult because the minimum acceptable payment to a potential supplier is private information. We describe how an auction of payment contracts can be designed to elicit this information during the design phase of a conservation-payment program. With an estimate of the ecosystem-service supply curve from a pilot auction, conservation planners can explore the financial, ecological, and socioeconomic consequences of alternative scaled-up programs. We demonstrate the potential of our approach in Indonesia, where soil erosion on coffee farms generates downstream ecological and economic costs. Bid data from a small-scale, uniform-price auction for soil-conservation contracts allowed estimates of the costs of a scaled-up program, the gain from integrating biophysical and economic data to target contracts, and the trade-offs between poverty alleviation and supply of ecosystem services. Our study illustrates an auction-based approach to revealing private information about the costs of supplying ecosystem services. Such information can improve the design of programs devised to protect and enhance ecosystem services.
authors.affiliation: Center for International Development, Kennedy School of Government, Harvard University, 79 JFK Street, Cambridge, MA 02138-5801, USA.
authors.forename: B Kelsey
authors.initials: BK
authors.lastname: Jack
authors.forename: Beria
authors.initials: B
authors.lastname: Leimona
authors.forename: Paul J
authors.initials: PJ
authors.lastname: Ferraro
mesh_terms: D002202:Capital Financing / Q000379:methods*; D003247:Conservation of Natural Resources / Q000191:economics* / Q000379:methods*; D003362:Cost-Benefit Analysis; D017753:Ecosystem; D007214:Indonesia; D018803:Models, Economic; D012987:Soil
chemical_list: D012987:Soil