Essays in Natural Resource Economics
McConnell, Kenneth E
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Allocation decisions in many natural resource markets are governed by mechanisms designed to alleviate information asymmetries and other types of market imperfections. For example, the crew in most commercial fisheries is remunerated via a lay system of payments designed to alleviate a potential team agency problem. The four essays in this dissertation explore the use of mechanisms in natural resource and environmental economics. The first essay examines the lay system of payments in commercial fisheries. Under the lay system, the harvesting crew is remunerated via a share of total vessel revenues less a portion of trip expenditures. The essay has two goals. First, the essay provides an explanation for the lay system as an incentive mechanism to alleviate a potential team agency problem. This explanation of the lay system explains anomalies that are at odds with the theory of pure risk sharing. Second, the essay shows the implications of the lay system for econometric modeling of fisheries and for understanding firm behavior. The second and third essay, examine bidder behavior in auctions for cutting rights of standing timber in British Columbia. The second essay provides an empirical framework for estimating treatment assignment of observations given data on outcomes. The framework is used to explore whether bidder collusion was evident in a data set of nearly 3,000 auctions (over 10,000 individual bids) for cutting rights of standing timber in British Columbia from 1996-2000. The third essay examines the role of ex ante uncertainty over private values and ex post resale opportunities on bidder behavior. The essay extends the theoretical work of Haile (2003) by allowing for risk-averse bidders. The theoretical model is tested by examining both field data and experimental data from the lab. The fourth essay provides a formal model of individual contribution decisions under a tontine mechanism. The essay analyzes the performance of tontines and compares them to another popular fundraising scheme: lotteries. Individual contribution decisions under the optimal tontine, an equivalent valued single-prize lottery, and the voluntary contribution mechanism are compared using a controlled laboratory experiment.