Breaking Collusion in Auctions through Speculation: An Experiment on CO2 Emission Permit Markets

The European Emission Trading Scheme (EU‐ETS) has chosen to adopt an auctioning procedure to initially allocate CO₂ emission permits. Free allocation of permits will become an exception for the third phase (2013–2020) and most firms will have to buy all their permits on the market or via auctions. The ability of bidders to collude is a key concern about the design of the auction format. To counter collusion, the auction can be open to bidders without compliance obligations (speculators). This paper aims at studying experimentally speculation as a collusion‐breaking device in two different auction mechanisms: the uniform‐price sealed‐bid auction and the ascending clock auction. Our results suggest that a uniform sealed‐bid auction open to speculators should be chosen from a revenue maximization point of view. In this mechanism, compliance agents adopt an aggressive strategy toward speculators. This strategy significantly increases the seller's revenue, compared to the more collusive clock auction. In the latter, on the contrary, bidders accommodate speculators, letting them buy permits in the auction and buying their necessary permits on the secondary market. However, as opening the auction to speculators deteriorates efficiency, the regulator faces a trade‐off between these two objectives.     

REPRESENTATIONS AND INFLUENCE PROCESSES IN GROUPS: TOWARDS A SOCIO-COGNITIVE PERSPECTIVE ON COGNITION IN ORGANIZATION

The cognitive approach to organizations assumes the existence of collective representations in organizations. This article critically examines this assumption and proposes the adoption of a socio-cognitive perspective on collective cognition in organizations. This theoretical current, which rejects the traditional individual/social dichotomy and relies on the concept of social representation, advocates the study of social cognition, which implies a change in the unit of analysis from the individual/social levels to interactions. A collective representation is viewed as being related to the socio-cognitive dynamics occurring between interacting group members. Communication and influence processes are thus critical to the construction of a collective representation. The socio-cognitive perspective, and the theory of social influence which it involves, can offer new and important insights on everyday thinking and behaving in organizations. However, this perspective calls for new methodological approaches to the study of organizational cognition.     

Power of Incentives with Motivated Agents in Public Organizations

Public service motivation is often considered as an argument for low‐powered incentive schemes in the public sector. In this paper, we characterize the optimal contract between a public regulator and an altruistic agent according to the degree α of public service motivation, when the type of the public service consumer is privately observed. We show that the requested effort is nondecreasing with α and can be higher than the first‐best level. Moreover, we show that the agent is put on a high‐powered contract when some customers are served but that this contract is associated with different types of consumers according to α. In contrast, the agent is never put on a cost‐plus contract. Finally, we show that the first‐best allocation can be achieved under budget balance for a degree of altruism higher than a threshold that we characterize.