Abstract
Agglomeration bonuses (ABs) are payments conditional on the contiguity of landowners' conservation areas. We study whether differentiating the bonuses between internal (withinlandholding) and external (between-landholdings) boundaries can improve biodiversity conservation. Using an ecological-economic model and game theory, our simulations on realistic landscapes consisting of several multi-plot landholdings reveal that such differentiation is key in determining AB cost-effectiveness. Undifferentiated ABs (where internal equal external bonuses) are the most cost-effective schemes when regulators' budgets are low. Yet, when budgets increase, AB cost-effectiveness improves by increasingly prioritizing internal over external bonuses, until a budget threshold beyond which only internal bonuses remain. The complexity of compensation between plots belonging to different landowners largely explains these patterns. Given this complexity, the most cost-effective schemes are characterized by little or no cooperation between landowners. Regarding policy, we conclude that differentiated ABs are cost-effective schemes that should be part of the regulators' toolbox.