PGR Workshop: At what price? The effects of a pricing rule change on outcomes in a PES auction
In auctions with multiple units of similar goods available for exchange - as in reverse auctions for the procurement of agri-environmental behaviours - realised allocations and aggregate costs are likely to critically hinge upon specific institutional arrangements and economic setting. This paper presents the first field trial of its kind, instituting changes in which the pricing rule was switched from ”pay-as-bid” to ”uniform price”. Our results are clear: this switch led to a statistically significant and economically meaningful reduction in mean bids of 40% and mean payments by a similar amount. Moreover, the positive results extend to the inferred cost of participation too: updating reduced by over a half, sniping by more than a sixth.