Auctioning emission permits with market power

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dc.contributor.authorÁlvarez González, Francisco
dc.contributor.authorAndré García, Francisco Javier
dc.date.accessioned2023-06-18T05:54:57Z
dc.date.available2023-06-18T05:54:57Z
dc.date.issued2016
dc.description.abstractWe analyze emission permit auctions in a framework in which a dominant firm enjoys market power both in the auction and in the secondary market while its competitor behaves in a competitive way. We obtain linear equilibrium bidding strategies for both firms and a unique equilibrium of the auction, which is optimal ex-post for the dominant firm. Under specific distributional assumptions we conclude that the auction always awards less permits to the dominant firm than the cost-effective amount. Our results serve as a warning about the properties of auctioning under market power. Under interior solution the auction allocation is dominated by grandfathering in terms of aggregated cost with probability one. As a policy implication, the specific design of the auction turns out to be crucial for cost-effectiveness. The chances of the auction to outperform grandfathering require that the former is capable of diluting the market power that is present in the secondary market.
dc.description.departmentDepto. de Análisis Económico y Economía Cuantitativa
dc.description.facultyFac. de Ciencias Económicas y Empresariales
dc.description.refereedTRUE
dc.description.sponsorshipMinisterio de Ciencia e Innovación (MICINN)/FEDER
dc.description.statuspub
dc.eprint.idhttps://eprints.ucm.es/id/eprint/55343
dc.identifier.doi10.1515/bejeap-2015-0041
dc.identifier.issn1935-1682
dc.identifier.officialurlhttps://doi.org/10.1515/bejeap-2015-0041
dc.identifier.urihttps://hdl.handle.net/20.500.14352/23583
dc.issue.number4
dc.journal.titleB.E. Journal of Economic Analysis Policy
dc.language.isoeng
dc.publisherDE GRUYTER
dc.relation.projectIDECO2012-39553-C04-01
dc.rights.accessRightsrestricted access
dc.subject.keywordCap-and-trade systems
dc.subject.keywordAuctions
dc.subject.keywordGrandfathering
dc.subject.keywordMarket power
dc.subject.keywordBayesian games of incomplete information.
dc.subject.ucmComercio
dc.subject.ucmMicroeconomía
dc.subject.unesco5304.03 Comercio exterior
dc.subject.unesco5307.15 Teoría Microeconómica
dc.titleAuctioning emission permits with market power
dc.typejournal article
dc.volume.number16
dspace.entity.typePublication
relation.isAuthorOfPublication5c6d1bab-3a96-455e-96d4-556c4c6c23da
relation.isAuthorOfPublicationf0c35ff8-abed-4dd3-9388-4bd41a288ee6
relation.isAuthorOfPublication.latestForDiscovery5c6d1bab-3a96-455e-96d4-556c4c6c23da
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