Spatial Habitat Design by Agglomeration Bonus* Gregory M. Parkhurst Jason F. Shogren Department of Economics and Finance University of Wyoming Laramie, WY 82071-3965 12 June 2003 Abstract Herein we explore the robustness of the agglomeration bonus mechanisms designed to create voluntary spatial habitat configurations for protecting nature on private lands (e.g., endangered species, biodiversity). We design a grid game experiment to test whether the agglomeration bonus mechanism can induce four players to voluntarily coordinate their land retirement decisions to create four alternative biological habitats—a core, a corridor, a cross, and four corners. Our results suggest the agglomeration bonus can work. The bonus mechanism was most successful in achieving the corridor objective. Coordination to the core and cross was more difficult because it required all four players to align their actions. Voluntarily creating isolated corners was relatively easy. If players first had incentive to create these corners, coordination failure in the core was then more likely. Initial isolation incentives made it more difficult to induce players to coordinate at the core even when it was more profitable. *Thanks to the Institute for Environment and Natural Resources, the Bugas funds, and Stroock professorship at the University of Wyoming for the financial support. Thanks to Tom Crocker, Stephan Kroll, John Tschirhart, and seminar participants at Washington, CIRANO, ERS/USDA, and Chico for their useful suggestions. All errors remain our own.