Prioritizing payment for environmental services: Using nonmarket benefits and costs for optimal selection

This article provides a practical, applied analysis of optimal targeting in agricultural land preservation, comparing the performance of four alternative targeting strategies. Nonmarket benefit data and hedonic cost estimates are used for parcels in Sussex County, Delaware. The results show that branch-and-bound optimization (OPT) does not significantly outperform the much simpler benefit-cost ratio targeting (BCRT). However, significant losses of potential net benefits occur when applied methods overlook either benefits or costs. In this application, benefit targeting (BT) and cost targeting (CT) significantly underperform both OPT and BCRT, with BT underperforming all other methods.