Auctions in an outcome-based payment scheme to reward ecological services in agriculture – Conception, implementation and results



development of the prices in the next auction. Thereby it will be interesting to see how the
price levels will develop and if the price areas will spread or if they even adjust to an in
fact uniform premium. This will be analysed during the second auction, starting in May
2005.

Also these first results show, that the expenditure of time needed for farmers to take part in
the auction are likely not significant higher than in existing agri-environmental programs.
Furthermore it was the first auction farmers participated and a reduction of corresponding
transaction costs - caused by e.g. filling out forms, calculating prices or taking part at the
auction in general - can be expected during next auctions. Seen from a transaction cost
economics point of view the results of the first survey of farmers show, that auction have a
high potential to be used as an award procedure and that farmers are able to deal with
auctions.

To evaluate the components of the regional payment scheme after the first auction
differentiated impressions emerge. As shown in this paper, the practical use of auction and
an outcome-orientation - especially combined with auctions - proved to work very well in
the way it was theoretically intended and received a high acceptance as well as on the part
of the farmers in the model-region and the integrated regional and supra-regional
administration. Whereas the component Regional Advisory Board could hardly be
evaluated in an alike positive way. The main reason is, that even if the first auction took
place a real sense-making process about the demand for ecological goods wasn’t
necessary, because of the low available budget of 30.000 €. Determined by this budget and
the intention to reach as much plots and farmers as possible in was at hand to advertise the
ecological goods grassland, because they are relative easy and cheep to produce. So still
the question is unanswered, how an additional institution like the Regional Advisory Board
could be justified. Especially in consideration of the additional transaction costs connected
with the implementation and run of an institution like this.

A detailed economic evaluation of the practical interaction of the individual components of
this decentralised and market-similar remuneration concept will take place in the process
of the conversion phase. Here it also applies to analyse the practical relevance of the New
Institutional Economics. Therefor the Transaction Cost Economic and the quantification of
the project-relevant farmer’s transaction costs are focused. Only by this comprehensive

14



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