Predicting the performance of conservation tenders when information on bidders's costs is limited
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Buying environmental services from private landholders using tendering mechanisms are usually
subject to a budget constraint. Auction theory has mostly focused on target-constrained auctions
and is not well developed for this type of auction. This paper examines the predictive capacity of a
simple model developed for budget-constrained tenders, already used to design new conservation
programs, by submitting it to controlled lab experiments. We study the capacity of the model to
predict both experimental bids and the performance of the auction institution, based on the kind of
limited information typically available to a conservation agency. We conclude there exists an
optimal level of information on bidders’ costs, neither too large nor to small, making the tender
worth considering as a policy option as well as allowing an ex-ante assessment of its economic
performance.