Multi-objective optimization to evaluate and sell forest ecosystem services

Research Sponsored By: USDA National Institute of Food and Agriculture
Principal Investigator: Sándor F. Tóth
Project Description
Project goal is to build, test, and deploy a subscription mechanism for forest ecosystem services, ECOSEL. ECOSEL combines multi-objective optimization technology with an auction platform to match willing sellers of eco-services with willing buyers. Optimization is used to identify management plans that lead to Pareto-optimal bundles of forest benefits such as timber, carbon, and old-forest habitat. Bids are solicited for the bundles using the opportunity costs of the plans as reserve prices. The plan with bids whose combined value most exceeds the reserve price is implemented. The project will demonstrate the mechanics of the new technique in a real decision-making context. Specific objectives include: (1) building a web-based implementation of ECOSEL, (2) fine-tuning the design variables of the mechanism both theoretically and empirically, (3) running a real auction, and (4) studying participants’ bidding behavior along with the winning scenario to better understand the stakeholders’ monetary preferences with respect to ecosystem services. Other objectives are to expand the use of ECOSEL as an educational tool in resource management and environmental economics classes, and as laboratory equipment for economists to study public goods contribution games.