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Electronic BushBroker exchange: Designing a combinatorial double auction for native vegetation offets

Nemes, Veronika and Plott, Charles R. and Stoneham, Gary (2008) Electronic BushBroker exchange: Designing a combinatorial double auction for native vegetation offets. SSRN Working Paper Series, Social Science Research Network , New York. (Unpublished) http://resolver.caltech.edu/CaltechAUTHORS:20140325-155404018

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Abstract

In Victoria, Australia individuals or firms wishing to proceed with development that involves the clearing of native vegetation are required to obtain an offset to replace the vegetation destroyed. This paper focuses on the design and testing of the electronic BushBroker exchange and the evaluation of alternative market institutions, while briefly describing the metric, trading rules and contracts used in the Victorian native vegetation offset scheme. The purpose of the design is to facilitate efficient trades of offsets between developers and landowners and to overcome the complexities inherent in the native vegetation market. Four different types of policy and economic complexities were identified: policy, transaction, strategic, and time complexities. The market design recommended includes 'smart market' features (optimization constrained by the offset trading rules), combinatorial bidding preferences (or package bidding) on both the buyers' and the sellers' side, and strategic tools (including search and query functions and 'market making'), to encourage competitive trading activity. This paper seeks to elucidate the rationale behind these design features. We use two types of tests to assess the performance of the system. A series of experimental tests were used to evaluate the software performance, usability and to elucidate specific bidding behaviour and to assess efficiency. Simulations using actual data were employed to test the robustness of the system by increasing the complexity and scale of the data.


Item Type:Report or Paper (Report)
Related URLs:
URLURL TypeDescription
http://dx.doi.org/10.2139/ssrn.1212202SSRNWorking paper
Additional Information:Date posted: August 8, 2008 ; Last revised: November 20, 2008. File name: SSRN-id1302206. The authors thank the Victorian Department of Sustainability and Environment (DSE) and the Department of Agriculture, Fisheries and Forestry (DAFF) for support through the National Action Plan for Salinity and Water Quality Market Based Instruments Pilot Program Round 2. The design and testing of a market mechanism for native vegetation offsets is part of a broad agenda of work on economic design in the area of natural resource management. Although this has involved many people, key contributors include Anne Buchan, Michael Crowe, Scott Lawrence, James Todd, David Parkes and other members of the Biodiversity and Ecosystem Services Division of DSE. We also thank Ingrid Burfurd for her contributions to the section on contract design, Andrew O’Keefe for his assistance with running the experiments and analysing the results, and Tom McCarthy for his help with the simulations. A very special thank you goes to Travis Maron for single-handedly programming the electronic BushBroker exchange and to Hsing-yang Lee for dealing with many technical details. We also thank all members of the Economics Branch and the Environmental Policy and Climate Change Division (EPCC) at DSE as well as all workshop participants for providing valuable feedback that helped to shape the final outcome of this project. We also thank Marianna Plott.
Funders:
Funding AgencyGrant Number
Victorian Department of Sustainability and Environment (DSE) (Australia)UNSPECIFIED
Department of Agriculture, Fisheries and Forestry (DAFF) (Australia)UNSPECIFIED
Subject Keywords:native vegetation, offsets, biodiversity, double auction, combinatorial auction, experimental economics, market design
Classification Code:JEL C90, D44
Record Number:CaltechAUTHORS:20140325-155404018
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20140325-155404018
Official Citation:Nemes, Veronika and Plott, Charles R. and Stoneham, Gary, Electronic BushBroker Exchange: Designing a Combinatorial Double Auction for Native Vegetation Offsets (July 2008). Available at SSRN: http://ssrn.com/abstract=1212202 or http://dx.doi.org/10.2139/ssrn.1212202
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:44513
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:27 Mar 2014 23:25
Last Modified:27 Mar 2014 23:25

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