, Volume 14, Issue 1, pp 55-73

An Experimental Study of Electronic Bulletin Board Trading for Emission Permits

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Abstract

This paper reports a laboratory experiment that studies several features of a tradable emission permit program recently implemented in the Los Angeles area. The experiment focuses on the new Electronic Bulletin Board trading institution, in which firms publicly post proposed terms of trade. Potential trading partners can review this information online, and transactions are executed following bilateral negotiation. The experiment includes trading restrictions implemented in the regulations due to the geography of Los Angeles. We find that the bulletin board market performs well and that prices reflect market conditions as accurately as in the continuous double auction trading institution.