Consignment auctions

Peyman Khezr and Ian MacKenzie

No 558, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This article investigates pollution permit consignment auctions. In this process firms obtain an initial endowment of permits that must be consigned to the auctioneer for sale. In the auction, firms bid for permits, obtain their equilibrium permit allocations, and receive revenue from their consigned permits. The main justifications for this auction are that it is politically attractive and generates clear price discovery. Yet we show this auction provides no clear price signal: in equilibrium, firms demand their own initial endowments and their payoffs are independent of the clearing price. Our results have policy implications for the California Cap-and-Trade Program.

Keywords: permit auction; consignment (search for similar items in EconPapers)
JEL-codes: D44 Q52 (search for similar items in EconPapers)
Date: 2016-05-03
New Economics Papers: this item is included in nep-reg
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Citations: View citations in EconPapers (1)

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Journal Article: Consignment auctions (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:558

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