RT Journal Article
T1 Auctioning emission permits with market power
A1 Álvarez González, Francisco
A1 André García, Francisco Javier
AB We 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.
PB DE GRUYTER
SN 1935-1682
YR 2016
FD 2016
LK https://hdl.handle.net/20.500.14352/23583
UL https://hdl.handle.net/20.500.14352/23583
LA eng
NO Ministerio de Ciencia e Innovación (MICINN)/FEDER
DS Docta Complutense
RD 1 sept 2024