Economic Aspects of Selling, Acquiring and Managing Ecosystem Services

This dissertation aims to identify and propose a few valuation strategies to provide insights to conservation agents and policymakers to achieve ecosystem conservation goals. The first two essays of the dissertation focus on how buyers and sellers value Ecosystem Services (ES) through the creation of an experimental market. Specifically, owners of grassland bird habitat participated in an auction to adopt “bird-friendly” haying practices in exchange for compensation. Consequently, private citizens (donors) were asked to engage in a novel pledging process, inspired by Lindahl pricing, to raise funds to compensate the participating landowners. The first essay employs a triple hurdle model to estimate the participation and contribution behavior of the donors simultaneously. Results indicate that while the novel solicitation approach reduces participation, it improves contribution from those who participate. The second essay introduces a uniform price auction with screening criteria, motivated by the challenges of acquiring private land to provide ES. We design the screening criteria to classify ES suppliers into two groups and the criteria is determined so that a bidder cannot influence her group assignment. Results from laboratory experiment show that the screening auction has the potential to be the most cost-effective (in terms of the number of units acquired) way compared to a uniform price auction and a discriminatory auction under certain conditions. The third essay builds on the idea that natural habitat that has been disrupted by human activity (e.g.: drilling and placing of well pads) provides ES at a lower level and therefore affects human wellbeing adversely. This chapter quantifies the impact of drilling activities on six different land use and land cover types in North Dakota using a dynamic matching approach. Results show that there has been a decline in grassland area in the range of 2.58% to 2.99% due to energy development in North Dakota