CAN INCENTIVE-COMPATIBLE VALUE
ELICITATION METHODS HELP DESIGN PES
SCHEMES? Evidence from lab and field
Daan Van Soest1 , Ty Turley2 , Paul Christian3 , Rahel Jigi Kitessa∗1 , and Eline Van Der
Heijden1
1
2
Tilburg University [Tilburg] – PO Box 90153, 5000LE Tilburg, Netherlands
Brigham Young University (BYU) – 773 TNRB Provo, UT 84602, United States
3
The World Bank – United States
Abstract
Payment for Environmental Services (PES) is a method that pays low cost environmental
goods and service providers. Targeting such providers allows efficient allocation of resources.
The most widely utilized PES implementation instrument is posted offer take-it-or-leave-it
(TILI) method. While TILI is easy to implement and does not discriminate among the service providers (thus less controversial), it does not eliminate the information rent problem.
Hence, an alternative instrument suggested to address the information rent problem in PES
implementation is the auction. Theoretically auction and posted offer price yield similar output given random allocation of subjects to these mechanisms. However, different studies have
recorded discrepancies in the output between the two mechanisms, which is also confirmed by
this paper. This paper explores the causes of disparity between the two mechanisms in which
the role of behavioral variables and effort spent on decision making is analyzed, thus tests
the deliberate choice hypothesis. The results suggest that variation in auction output can be
predicted by behavioral parameters such as loss aversion, and risk aversion while same does
not hold for TILI. Whereas, contrary to time spent on auction decision making, significantly
lower effort is spent on decision making by the TILI. Accordingly, the auction outcome gives
more information on decision making behavior than the TILI.
Keywords: Emperics
∗
Speaker
sciencesconf.org:lagv2017:136665