Essays on developing country markets in environment and health

The three essays in this dissertation explore the performance of new markets in environment and health in developing countries. The first and the second essays focus on the performance of market-based environmental policies in developing countries. Specifically, the first essay finds a strong divergence in the performance of a uniform price, sealed bid auction and a posted price offer market that uses the auction clearing price to set the offer price. The auction generates far fewer bids below the clearing price and significantly higher mean contract compliance than the theoretically equivalent posted offer market. Random assignment to the allocation mechanisms facilitates a straightforward comparison of the allocation and compliance results. Market experience is often necessary for convergence across different market mechanisms. The second essay investigates a similar auction mechanism in greater detail, and in a context that allows for learning. Bidders participate in seven trial rounds before placing their final bid. This auction design generates a panel of bidding data which is examined for evidence of learning by bidders. Results suggest that bidders use feedback from early auction rounds to inform their bidding strategies. Allocation results appear to improve as a result of the multiple bidding rounds. In new markets, participants must learn both about the market mechanism and about the value of the good or service. The third essay explores how inexperienced market participants form their willingness to pay when information sources are limited. In the context of a new health product, experimental manipulation of product prices and information provides identification of consumer inference about product quality from price. Comparing the relationship between prices and purchase decisions across information conditions reveals a non-linear inference process consistent with significant quality inference from price at the upper end of the price range.