Preference information and experimental heritage conservation auctions

PurposeThe purpose of this paper is to investigate the cost effectiveness of the existing conservation grant disbursement mechanism in George Town, Penang. It reports the effect of disclosure of conservation preferences by the conservation agency on the conservation cost.Design/methodology/approachA test bed laboratory experiment is reported on, in which house owners competed in a sealed bid auction to obtain conservation subsidies/grants. In one treatment, owners knew the preference of, or priority given by, the regulator to certain types of conservation efforts, whereas in the second treatment, the regulator concealed this priority.FindingsThe results showed that owners tailored their applications to the given priority rather than to the true conservation costs in the preference‐known treatment group. Although the selected conservation works did not differ significantly between the two treatments, owners misrepresented their true conservation costs.Research limitations/implicationsGiven the lack of consensus of the tool to measure ex post conservation value, the study relies on conservation efforts/works to disburse subsidy/grant. Allocative efficiency can be enhanced if this information is available.Practical implicationsThe presented results suggested that concealing priority information could be used to improve the cost‐efficiency of existing disbursement policy.Originality/valueDrawing from the problems of asymmetry information between house owners and conservation agency, the study provided evidence in support of the idea that disbursement of conservation fund was based on the conservation efforts/inputs. In terms of costs, not disclosing the preferences information could encourage competition and reduced conservation costs.