Agglomeration bonus in small and large local networks: A laboratory examination of spatial coordination

The Agglomeration Bonus (AB) is a subsidy mechanism intended to induce adjacent landowners to coordinate environmental conservation activities. This paper explores the effects of landowner group size on spatial coordination under the AB in laboratory experiments where players are located on circular local networks. The experiments indicate a significant difference in patterns of coordination between groups. Additionally, global coordination on a single strategy is obtained in half of the groups and in the remaining half, both strategies exist giving rise to localized areas of coordinated land uses on the network.

► We consider the Agglomeration Bonus subsidy scheme as a coordination game. ► We consider this game on a local network where every individual has two neighbors. ► We analyze equilibrium selection & spatial coordination using lab experiments. ► The treatment variable is network size - small & large with six & twelve players. ► There is both global and localized coordination of land uses in small and large networks.