In 2006, the University of Rhode Island (URI) and EcoAsset Markets, Inc. (EAM) began an economic experiment to bring farmers together with residents of Jamestown, Rhode Island in support of hayfield management for grassland-nesting birds, particularly the bobolink. The project was funded by a U.S. Department of Agriculture Conservation Innovation Grant through the Natural Resource Conservation Service (USDA/NRCS) with additional support from URI, the RI Agricultural Experiment Station and EAM.

The project applied methods from experimental economics (“experiments studying economic decisionmaking”) and economics of “mechanism design” (“how transactions occur”) for delivery of public goods. Whether delivered by private action, such as farmers implementing conservation practices, non-profit organizations protecting environmental assets. or government providing incentives through subsidies and tax provisions, public goods benefit many people simultaneously and the provider is often unable to exclude beneficiaries of the good. In contrast, private goods, such as the familiar food and fiber produced by farmers, are “excludable” and the producer of private goods typically is able to withhold benefits of the goods from individuals who have not paid some price.

Farmers’ production of wildlife habitat conservation services, particularly for non-game species, is a public good because typically many people can benefit from knowing that a local ecosystem is well-functioning, or from viewing wildlife, without having to compensate farmers for its provision.

For two years, 2007 and 2008, the project team conducted a community based market, Nature Services Exchange of Jamestown, to discover the willingness of households to participate in an exchange between households and farmers to fund hayfield conservation.

What did the project accomplish?

1. The project determined the willingness-to-pay - under certain specific experimental economic approaches– for bobolink protection on farm fields.
2. The project tested the effectiveness of certain specific marketing approaches in soliciting Jamestown household participation in the market.
3. The project determined specific approaches to engage and work with farmers to contract for farmland conservation practices.
4. The project completed detailed wildlife habitat studies of bobolinks and grassland-nesting birds on Jamestown farms in 2006, 2007, 2008.

A Sampling of “What We Learned?”

1. The “fledglings” characteristic of a contract was statistically significant - increasing the expectation of fledglings protected under a contract with farmers influenced monetary offers from residents positively.
2. Identification from stated-preferences (in an early, marketing survey) that bobolinks are of value but that perhaps restoration of hayfields (and potential removal of invasive species) may be of greater value.
3. The presence of “views” from roads as a contract-characteristic increased willingness to pay.
4. Depending on which specific variable we included in the analysis, second-time participants, on average, were willing to pay about $10 to $30 less for a contract, on average. This result is consistent with concerns about the possibility that revenues would erode over time. Because the project did not begin with a community visioning process, more research is needed on the issue of market sustainability.
5. Participants are willing to pay a lower amount if they come from a household where a member has recently completed mail-orders of some type of items for children; this result may be an indication of overall demands on the household budget.
6. Older individuals were, on average, willing to pay less for a farm-wildlife contract than were younger participants.
7. The average offer-amounts differ across the mechanisms. Further analysis provides evidence that the main difference is that the UPA (Uniform Price Auction) mechanism generates lower offers, on the order of $15 lower relative to the other mechanisms. Although a statistical model that allows for differences across the mechanism yields mean estimates that rank offers under PR (Proportional Rebate) highest, followed by PM (Pivotal Mechanism), followed by UPC (Uniform Price…), the difference across these three mechanisms is not statistically significant. ( Based on 2007 we learned that the Proportional Rebate approach appeared to provide nearly (statistically) the same level of first-time commitments of money as did the Pivotal Mechanism. We also learned that the Uniform Price Auction approach produced a statistically lower level of money.)
8. Also from 2007, we learned that the likelihood of getting $XX (say $50) from someone who actually values the field at $XX or more is statistically significantly higher if we make the question yes-no rather than “choose a number or fill in the blank.”
9. From the 2007 market we are able to estimate the proportion of people who will be willing to offer a particular amount of money (at least conditional on their choice to participate).

Dr. Swallow’s Participation Graphs Segmented by Economic Mechanism