Collusion in auctions for emission permits: An experimental analysis

Dallas Burtraw, Jacob Goeree, Charles A. Holt, Erica Myers, Karen Palmer, William Shobe

Research output: Contribution to journalArticle

Abstract

Environmental markets have several institutional features that provide a new context for the use of auctions and that have not been studied previously. This paper reports on laboratory experiments testing three auction forms-uniform and discriminatory price sealed-bid auctions and an ascending clock auction. We test the ability of subjects to tacitly or explicitly collude in order to maximize profits. Our main result is that the discriminatory and uniform price auctions produce greater revenues than the clock auction, both with and without explicit communication. The clock appears to facilitate successful collusion, both because of its sequential structure and because it allows bidders to focus on one dimension of cooperation (quantity) rather than two (price and quantity).

Original languageEnglish (US)
Pages (from-to)672-691
Number of pages20
JournalJournal of Policy Analysis and Management
Volume28
Issue number4
DOIs
StatePublished - 2009
Externally publishedYes

ASJC Scopus subject areas

  • Business, Management and Accounting(all)
  • Sociology and Political Science
  • Public Administration

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