Economic incentives for endangered species protection

Private lands have an important role in the success of the Endangered Species Act (ESA). The current approach to protecting species on private land has resulted in disincentives to the landowner, which have decreased the success of the ESA. The first essay defines and evaluates eight incentive mechanisms for protecting species on private land. The incentive mechanisms are compared and contrasted according to a distinct set of biological, landowner, and government criteria. The discussion indicates voluntary incentive mechanisms can be designed where landowners view habitat as an asset, and are willing participants in protecting habitat. The incentive mechanism best suited for conserving habitat in a given region depends on many factors. The second essay examines the use of a dual mechanism, tradable habitat preservation requirements (THPR) with a subsidy. The subsidy is a function of the configuration of the conserved land, ensuring that the biologically effective landscape design is conserved, while the THPR policy ensures that conservation is accomplished at least cost. We evaluate the dual mechanism in a general equilibrium utility maximization framework, in which conservation is modeled as an impure public good for which landowners have heterogeneous preferences. The third essay examines the effectiveness of a vector of agglomeration bonus mechanisms at creating targeted habitat configurations for protecting endangered species, and doing so voluntarily. A government agency's role is to target the critical habitat, to integrate the agglomeration bonus into the compensation package, and to provide landowners unconditional freedom to choose which acres to retire. The lab results indicate in many cases subjects coordinated their conservation activities to achieve the optimal habitat configuration. In the fourth essay bidding behavior in incentive compatible Vickrey-style auctions when people have both positive and negative induced values for the good is explored. In aggregate, bidding in the classic second-price auction is precise but biased. In contrast, observed bidding behavior in the random nth-price auction is demand revealing irrespective of induced value, but is imprecise.