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The performance of multi-type environmental credit trading markets: Lab experiment evidence

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  • Li, Zhi
  • Liu, Pengfei
  • Swallow, Stephen K.

Abstract

We experimentally compare the performance of two multi-type environmental credit trading markets. The first trading market is called the multiple market (MM) institution, which allows the providers to sell jointly produced credits of all types. The second trading market is called the single market (SM) institution, where the providers of jointly produced credits can only choose one type of credit to sell. We investigate several key indicators, including the trading price, quantity, and net social benefit, to compare the performance of the SM and MM institutions. We find that the trading prices are significantly lower in MM compared to SM, indicating that MM potentially benefits the credit buyers. We also find that SM leads to more credit productions. Since not all credits can be traded in SM, the increase in the production cost outweighs the increase in the total social benefit. As a result, the net social benefit is lower in SM compared to MM. We expand the literature by firstly designing a market platform for multi-type credit trading and then assessing their performance with lab experiment evidence.

Suggested Citation

  • Li, Zhi & Liu, Pengfei & Swallow, Stephen K., 2022. "The performance of multi-type environmental credit trading markets: Lab experiment evidence," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:jeeman:v:111:y:2022:i:c:s0095069621001145
    DOI: 10.1016/j.jeem.2021.102563
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    More about this item

    Keywords

    Multi-type credit trading; Experimental economics; Double auction; Production complementarity;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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