Bilateral Oligopoly,Private Information,and Pollution Permit Markets |
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Authors: | David A Malueg Andrew J Yates |
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Institution: | (1) Department of Economics, University of California, Riverside, CA 92521, USA;(2) Department of Economics, E. Claiborne Robins School of Business, University of Richmond, 1 Gateway Rd., Richmond, VA 23173, USA |
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Abstract: | We analyze the effects of strategic behavior and private information in pollution permit markets in which all firms have market
power. The market is characterized by supply-function equilibria. Firms submit net supplies for permits and a market maker
determines the market-clearing price. Net supplies depend on abatement cost functions, which in turn depend on private information
parameters. We calculate the increase in aggregate abatement costs due to strategic behavior and private information and show
that private information attenuates the effects of strategic behavior.
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Keywords: | Bilateral oligopoly Pollution permits Private information |
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