Walrasian Prices in Markets with Tradable Rights

Carlos Hervés-Beloso, Francisco Martínez () and Jorge Rivera ()
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Francisco Martínez: Universidad de Chile
Jorge Rivera: Universidad de Chile

A chapter in The Economics of the Global Environment, 2016, pp 535-550 from Springer

Abstract: Abstract In this pape,r we consider an exchange economy where there is an external restriction for the consumption of goods. This restriction is defined by both, a cap on consumption of certain commodities and the requirement of an amount of rights for the consumption of these commodities. The caps for consumption are imposed exogenously due to the negative effects that the consumption may produce. The consumption rights or licences are distributed among the agents. This fact leads to the possibility of establishing licence markets. These licences do not participate in agents’ preferences, however the individual’s budgetary constraint may be modified, leading to a reassignment of resources. Our aim is to show the existence of a Walrasian equilibrium price system linking tradable rights prices with commodity prices.

Keywords: Competitive equilibrium; Tradable licences; Consumption rights; Externalities; Cap-and-trade program (search for similar items in EconPapers)
JEL-codes: D51 D62 Q52 (search for similar items in EconPapers)
Date: 2016
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Journal Article: Walrasian prices in markets with tradable rights (2012)
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DOI: 10.1007/978-3-319-31943-8_23

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