A revealed preference approach to estimating supply curves for ecosystem services: use of auctions to set payments for soil erosion control in Indonesia

Conserv Biol. 2009 Apr;23(2):359-67. doi: 10.1111/j.1523-1739.2008.01086.x. Epub 2009 Oct 20.


To supply ecosystem services, private landholders incur costs. Knowledge of these costs is critical for the design of conservation-payment programs. Estimating these costs accurately is difficult because the minimum acceptable payment to a potential supplier is private information. We describe how an auction of payment contracts can be designed to elicit this information during the design phase of a conservation-payment program. With an estimate of the ecosystem-service supply curve from a pilot auction, conservation planners can explore the financial, ecological, and socioeconomic consequences of alternative scaled-up programs. We demonstrate the potential of our approach in Indonesia, where soil erosion on coffee farms generates downstream ecological and economic costs. Bid data from a small-scale, uniform-price auction for soil-conservation contracts allowed estimates of the costs of a scaled-up program, the gain from integrating biophysical and economic data to target contracts, and the trade-offs between poverty alleviation and supply of ecosystem services. Our study illustrates an auction-based approach to revealing private information about the costs of supplying ecosystem services. Such information can improve the design of programs devised to protect and enhance ecosystem services.

MeSH terms

  • Capital Financing / methods*
  • Conservation of Natural Resources / economics*
  • Conservation of Natural Resources / methods*
  • Cost-Benefit Analysis
  • Ecosystem*
  • Indonesia
  • Models, Economic
  • Soil


  • Soil