Assigning pollution permits: are uniform auctions efficient?

Francisco Alvarez Gonzalez (), Cristina Mazón and Francisco André
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Cristina Mazón: Universidad Complutense Madrid

Economic Theory, 2019, vol. 67, issue 1, No 7, 248 pages

Abstract: Abstract We study the efficiency of the uniform auction as an allocation mechanism for emission permits among polluting firms. In our model, firms have private information about their abatement costs, which differ across firms and across units, and bidders’ demands are linear. We show that there is a continuum of interior Bayesian Nash equilibria, and only one is efficient, minimizing abatement costs. We find that the existence of many bidders is not a sufficient condition to guarantee an efficient equilibrium in the uniform auction. Additionally, bidders’ types have to be uncorrelated.

Keywords: Emission permits; Uniform auction; Efficiency; Incomplete information simultaneous games (search for similar items in EconPapers)
JEL-codes: D44 D61 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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Working Paper: Assigning pollution permits: are uniform auctions efficient? (2016)
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DOI: 10.1007/s00199-017-1089-1

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