Introduction

A century ago in Australia, food and fibre were scarce relative to the supply of habitat. Today the opposite could be argued. Governments now face the problem of encouraging landholders to provide public goods, such as habitat conservation, in the face of an economic environment that facilitates the production of private goods. Governments, both in Australia and overseas, have used a wide range of policy mechanisms to influence private land management including fixed-price grants, tax incentives and voluntary schemes. Latacz-Lohmann and Van der Hamsvoort (1997) propose, however, that auctioning conservation contracts as a means of creating markets for public goods has many theoretical advantages. They argue that competitive bidding, compared with fixed-rate payments, can significantly increase the cost-effectiveness of conservation contracting because of the cost revelation advantages of bidding processes.

In this chapter we explain how the now extensive economic literature on auction and contract design, and new approaches to measuring habitat quality, can be incorporated into a practical field trial conducted under the name of BushTender©. Results from two pilots conducted in two different regions of Victoria, Australia, are presented and discussed.

The first BushTender© pilot was conducted in two areas of Northern Victoria and the second in three areas within West and East Gippsland (see Figure 14.1). Although we report the results of two BushTender© pilots, there have been several other applications of this approach in Victoria and more recently across Australia.