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Can auctions control market power in emissions trading markets

Author

Listed:
  • R. Andrew Muller
  • Stuart Mestelman
  • John Spraggon
  • Rob Godby

Abstract

Using eight sessions (twenty-four ten-period markets) in a double ABA cross-over design, we demonstrate clear evidence of market power in double-auction emission trading markets (agents who are not constrained to only buy or sell). Conventional theory predicts that in half of the market-power environments monopsony should emerge and in half monopoly should emerge. Market-power outcomes are frequently observed, most often in the form of price discrimination, and most effectively by monopsonists.

Suggested Citation

  • R. Andrew Muller & Stuart Mestelman & John Spraggon & Rob Godby, 1999. "Can auctions control market power in emissions trading markets," Department of Economics Working Papers 1999-12, McMaster University.
    • Handle: RePEc:mcm:deptwp:1999-12
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    File URL: http://socserv.socsci.mcmaster.ca/econ/rsrch/papers/archive/99-12.pdf
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    References listed on IDEAS

    as
    1. Ledyard, John O. & Szakaly-Moore, Kristin, 1994. "Designing organizations for trading pollution rights," Journal of Economic Behavior & Organization, Elsevier, vol. 25(2), pages 167-196, October.
    2. Robert Godby, 2002. "Market Power in Laboratory Emission Permit Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 23(3), pages 279-318, November.
    3. Jamie Brown-Kruse & Steven R Elliot & Rob Godby, 1995. "Strategic Manipulation of Pollution Permit Markets: An Experimental Approach," Department of Economics Working Papers 1995-03, McMaster University.
    4. Godby, Robert W. & Mestelman, Stuart & Muller, R. Andrew & Welland, J. Douglas, 1997. "Emissions Trading with Shares and Coupons when Control over Discharges Is Uncertain," Journal of Environmental Economics and Management, Elsevier, vol. 32(3), pages 359-381, March.
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    Cited by:

    1. Bohm, Peter, 2003. "Experimental evaluations of policy instruments," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 10, pages 437-460, Elsevier.
    2. Morten Søberg, 2000. "Imperfect competition, sequential auctions, and emissions trading: An experimental evaluation," Discussion Papers 280, Statistics Norway, Research Department.
    3. Caplan, Arthur J., 2011. "Carbon sequestration and permit trading on the competitive fringe," Economic Modelling, Elsevier, vol. 28(6), pages 2803-2810.
    4. Carlén, Björn, 1999. "Large-Country Effects in International Emissions Trading: A Laboratoty Test," Research Papers in Economics 1999:15, Stockholm University, Department of Economics.

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