Pricing Strategies Under Emissions Trading: An Experimental Analysis

Svante Mandell, Markus Wråke, Erica Myers, Dallas Burtraw and Charles Holt
Additional contact information
Markus Wråke: IVL, http://www.ivl.se

No 2009:1, Working Papers from Swedish National Road & Transport Research Institute (VTI)

Abstract: An important feature in the design of an emissions trading program is how emissions allowances are initially distributed into the market. In a competitive market the choice between an auction and free allocation should, according to economic theory, not have any influence on firms’ production choices nor on consumer prices. However, many observers expect the method of allocation to affect product prices. This paper reports on the use of experimental methods to investigate behavior with respect to how prices will be determined under a cap-and-trade program. Participants initially display a variety of pricing strategies. However, given a simple economic setting in which earnings depend on this behavior, we find that subjects learn to consider the value of allowances and overall behavior moves toward that predicted by economic theory.

Keywords: carbon dioxide; climate change; emissions trading; distributional effects; electricity; allocation; auctions (search for similar items in EconPapers)
JEL-codes: C91 D44 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2009-01-13
New Economics Papers: this item is included in nep-ene, nep-env and nep-exp
Note: The link refers to RFF's server.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.rff.org/RFF/Documents/RFF-DP-08-49.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.rff.org/RFF/Documents/RFF-DP-08-49.pdf [301 Moved Permanently]--> https://www.rff.org/RFF/Documents/RFF-DP-08-49.pdf)

Related works:
Working Paper: Pricing Strategies under Emissions Trading: An Experimental Analysis (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:vtiwps:2009_001

Access Statistics for this paper

More papers in Working Papers from Swedish National Road & Transport Research Institute (VTI) VTI, Transport Economics, P.O. Box 6056, SE-171 06 Solna, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Biblioteket vid VTI () and Emil Svensson () and Claes Eriksson () and Tova Äng ().