Auction theory has mostly focussed on target-constrained auctions and is less well developed for budget-constrained tenders, which are the norm in environmental policy. This study assesses a theoretical model developed for budget-constrained tenders in its capacity to predict tendering performance under information deficiencies typical of field applications. If complemented by laboratory experiments, the model is able to make the correct policy recommendation when comparing the tender to an equivalent fixed-price scheme, even with poor predictive accuracy. This holds even if the policymaker has only limited information on the model's key input variables. © 2012 The Authors. AJARE © 2012 Australian Agricultural and Resource Economics Society Inc. and Wiley Publishing Asia Pty Ltd.
|Australian Journal of Agricultural and Resource Economics
|Published - 2013