How to best incentivize farmers to conserve biodiversity on private land is an important policy question. Conservation auctions provide a mechanism to elicit farmers' opportunity costs, but their design is challenging and often suffer from low participation due to strategic complexity. Conservation auctions should ideally be incentive-compatible, address spatial synergies that maximize biodiversity gains, and respect the predefined budget of the government. Recent advances in mechanism design suggest budget-feasible auctions, but little is known about average-case efficiency. Based on this line of research, we introduce an incentive-compatible conservation auction mechanism that considers the bid taker's spatial synergies and respects budget. The results are compared against the celebrated Vickrey-Clarke-Groves mechanism. Our numerical results estimate the efficiency loss that can be expected for different assumptions on the synergistic values of the government. They provide evidence that budget-feasible mechanisms provide a new tool for policymakers in this domain.
Batziou, Eleni and Bichler, Martin, "Budget-Feasible Market Design for Biodiversity Conservation: Considering Incentives and Spatial Coordination" (2023). Wirtschaftsinformatik 2023 Proceedings. 44.