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The performance of multi-type environmental credit trading markets: Lab experiment evidence

Zhi Li, Pengfei Liu () and Stephen K. Swallow

Journal of Environmental Economics and Management, 2022, vol. 111, issue C

Abstract: We experimentally compare the performance of two multi-type environmental credit trading markets. The first trading market is called the multiple market (MM) institution, which allows the providers to sell jointly produced credits of all types. The second trading market is called the single market (SM) institution, where the providers of jointly produced credits can only choose one type of credit to sell. We investigate several key indicators, including the trading price, quantity, and net social benefit, to compare the performance of the SM and MM institutions. We find that the trading prices are significantly lower in MM compared to SM, indicating that MM potentially benefits the credit buyers. We also find that SM leads to more credit productions. Since not all credits can be traded in SM, the increase in the production cost outweighs the increase in the total social benefit. As a result, the net social benefit is lower in SM compared to MM. We expand the literature by firstly designing a market platform for multi-type credit trading and then assessing their performance with lab experiment evidence.

Keywords: Multi-type credit trading; Experimental economics; Double auction; Production complementarity (search for similar items in EconPapers)
JEL-codes: C72 Q56 Q57 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:111:y:2022:i:c:s0095069621001145

DOI: 10.1016/j.jeem.2021.102563

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Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

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