Double Auction experiments and their relevance for emissions trading

Bodo Sturm ()
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Bodo Sturm: Centre for European Economic Research (ZEW)

A chapter in Emissions Trading, 2008, pp 49-68 from Springer

Abstract: Abstract In this article, we discuss selected methodological problems from previous Double Auction (DA) experiments and analyze the two following questions experimentally. Firstly, does the framing of the decision situation influence the behavior in an emissions trading experiment? Secondly, is the Multiple Unit Double Auction (MUDA) able to suppress market power when the buying or selling side is highly concentrated? Based on a larger number of independent observations than analyzed in previous studies, the experiment generates two main results. Firstly, the framing of the decision situation does not influence the behavior of subjects. Secondly, the emissions trading market realizes a high degree of efficiency even under market power conditions. However, the MUDA is not able to restrict market power. We observe persistent price discrimination in both market power environments, i.e. the distribution of profits is strongly shifted in favor of the strong market side without greatly harming efficiency.

Keywords: Emissions trading; market power; experimental economics; Double Auction (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-0-387-73653-2_4

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DOI: 10.1007/978-0-387-73653-2_4

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