The U.S. Department of Agriculture (USDA) spends over $5 billion per year on conservation programs. Most of these programs are voluntary for landowners, and participants in these programs are paid to apply conservation to lands they own. In most cases, demand for conservation program participation exceeds available funding, so a form of auctions is used to select which offers for conservation will be the most cost-effective. USDA's Economic Research Service (ERS) recently evaluated the use of these kinds of auctions to facilitate application of conservation measures through the various USDA programs, reports the Wildlife Management Institute.

The ERS determined that auctions to deliver conservation are especially useful when USDA can leverage available information about participants to keep costs down, no well-established market exists, and when the agency needs a fair and transparent way of selecting participants when budgets are constrained.

In addition, the ERS researchers found that in some cases, auctions may be no better than administratively simpler approaches, such as offering a single level of funding to everyone that is willing to apply a specific conservation measure. They found that the criteria used to rank and select offers in auctions, the methods used to elicit offers, and the amount of information required to be provided with offers in auctions all can affect the auction's performance.

The bottom line is that the ERS found that by applying the basics of auction theory and design, USDA could likely improve the cost-effectiveness of delivery of many of their conservation programs. The full ERS report can be viewed online. (pmr)