An experimental investigation of bilateral oligopoly in emissions trading markets

Kenta Tanaka, Isamu Matsukawa, Shunsuke Managi

研究成果: ジャーナルへの寄稿記事

抄録

Market power in emissions trading has been extensively investigated because emerging markets for tradable emissions permits, such as the European Union's Emissions Trading Scheme (ETS), can be dominated by relatively few large sellers or buyers. Previous studies on market power in emissions trading have assumed the existence of a subset of competitive players. However, a key feature of emissions trading markets is that emissions permits are often traded by a small number of large sellers and buyers. Using a laboratory experiment, our objective in this paper is to test the performance of an emissions trading market utilizing a double auction in a bilateral oligopoly. Our results suggest that the theoretical bilateral oligopoly models can better describe market outcomes of emissions trading. The effects of the slope of the marginal abatement cost function on market power in laboratory experiments are found to be consistent with those predicted by the theoretical bilateral oligopoly model. How market power is exercised depends on the curvature of the abatement cost function. If the marginal abatement cost function of buyers (sellers) is less steep than that of sellers (buyers), the price of permits is lower (higher) than that under perfect competition. This is because the market power of buyers (sellers) exceeds that of sellers (buyers). The price of permits is close to the perfect competitive price when all traders have the sameslope of the marginal abatement cost function.

元の言語英語
記事番号101349
ジャーナルChina Economic Review
59
DOI
出版物ステータス出版済み - 2 2020

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Bilateral oligopoly
Seller
Emissions trading
Buyers
Market power
Cost function
Marginal abatement costs
Laboratory experiments
Traders
Emerging markets
Emission permits
Competitive prices
Emissions trading scheme
Tradable emission permits
European Union
Abatement costs
Curvature
Perfect competition
Double auction

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

これを引用

An experimental investigation of bilateral oligopoly in emissions trading markets. / Tanaka, Kenta; Matsukawa, Isamu; Managi, Shunsuke.

:: China Economic Review, 巻 59, 101349, 02.2020.

研究成果: ジャーナルへの寄稿記事

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