“Impact of Information Provision on Agglomeration Bonus Performance: An Experimental Study on Local Networks,”  by Simanti Banerjee , Division of Economics, Stirling Management School, University of Stirling, UK

The Agglomeration Bonus (AB) is a mechanism intended to induce adjacent landowners to spatially coordinate their ecosystem service supply activities. This paper uses an experimental approach to explore the performance of the AB scheme in achieving the socially optimal environmental outcome in a local network environment when the information available to subjects varies. In the baseline sessions, subjects receive information about the choices made by their direct neighbors only. In the treatment sessions subjects receive information about their direct neighbors and indirect neighbors’ choices. We find a significant difference in behavior between groups. We also observe the presence of localized coordination around the efficient outcome in groups which have more information. The strategic uncertainty imposed by network however limits the capacity of the mechanism to obtain the socially optimal outcome in the long run.