Agricultural Economics Department


Date of this Version



Cornhusker Economics, July 11, 2018,


Copyright 2018 University of Nebraska


Policy makers such as the USDA are interested in producers voluntarily adopting pro-environmental land use practices on their properties as these land uses deliver various ecosystem service benefits. As a result, they have implemented incentive based policies such as the Conservation Reserve Program (CRP) (Hellerstein et al., 2015). The CRP involves a reverse auction in which producers submit bids for adopting different land use practices. In running these auctions, agencies are interested in both cost-effectiveness i.e. procuring land use projects which yield the highest level of ecosystem service benefits for the money spent and specific environmental goals. One key goal is project procurement involving the same land use implemented on neighboring properties/parcels or those within some distance of each other. Such spatial contiguity is important as coordinated land management can magnify the production of different ecosystem service benefits such as water pollution reduction, lower habitat fragmentation and enhanced biodiversity conservation, and increased pollination services to name a few.