Most bid evaluation systems in conservation auctions consider both the proposed payment and the environmental attributes. When auctioneers have a more comprehensive understanding of the conservation benefits than bidders do, information becomes a central element of the auction design. Concealing information about conservation benefits may be the optimal strategy when entry decisions are not relevant. However, disclosing information may motivate landholders whose lands are associated with high environmental benefits to participate in an auction. The present study demonstrates that revealing information about conservation benefits can be an optimal strategy if it enhances an auction's participation rate when bid acceptance rates are high.

Offering agri‐environmental payments to address the various positive and negative environmental nonmarket effects of European Union agriculture might be an efficient way of dealing with market imperfections. However, the complex interaction between farming practices and agri‐environmental effects makes it difficult to assess what level of payments is justified under World Trade Organization's Green Box provisions. In reviewing the literature on positive and negative externalities of European farming on the environment, we find evidence to suggest that paying for agri‐environmental improvements may be appropriate under the Green Box provisions, even if the payments have a positive production effect.

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The share of agricultural area enrolled in EU agri-environmental programs varies significantly between EU member states. These national differences are explained, based on a model that reflects both, that these programs internalize externalities and the political economy. We identify six factors that affect the extent to which agri-environmental programs are implemented: environmental benefits, opportunity costs of participation, budgetary pressure, the share of program expenditures financed by the EU, the political weight attributed to farmers at the national, and the political influence of each country at the EU level. In addition, we demonstrate that, if the policy decision-making process is noncooperative at the EU level, countries that contribute less to the EU budget will ceteris paribus implement more programs. Using data of four years and feasible generalized least square methods, we are able to confirm our theoretical results including a noncooperative behavior of EU member states.JEL classifications: C7, H23, Q18

The present article explores the extent to which the performance of a sequential conservation auction can be improved by changing the duration of conservation contracts. Optimal bidding in the context of a sequential conservation auction is modeled as a dynamic optimization problem and solved through backward induction. We show that a longer duration of conservation contracts increases not only the privately optimal bid of a risk‐neutral bidder but also the probability that a land plot is included in a conservation program. Whether a longer duration of conservation contracts increases or decreases the budgetary cost effectiveness and economic efficiency of a sequential auction depends on the scale of variation for the cutoff bid.