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Economic Theory

, Volume 67, Issue 1, pp 211–248 | Cite as

Assigning pollution permits: are uniform auctions efficient?

  • Francisco AlvarezEmail author
  • Cristina Mazón
  • Francisco Javier André
Research Article
  • 111 Downloads

Abstract

We study the efficiency of the uniform auction as an allocation mechanism for emission permits among polluting firms. In our model, firms have private information about their abatement costs, which differ across firms and across units, and bidders’ demands are linear. We show that there is a continuum of interior Bayesian Nash equilibria, and only one is efficient, minimizing abatement costs. We find that the existence of many bidders is not a sufficient condition to guarantee an efficient equilibrium in the uniform auction. Additionally, bidders’ types have to be uncorrelated.

Keywords

Emission permits Uniform auction Efficiency Incomplete information simultaneous games 

JEL Classification

D44 D61 

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Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  • Francisco Alvarez
    • 1
    Email author
  • Cristina Mazón
    • 2
  • Francisco Javier André
    • 3
  1. 1.Departamento de Análisis Económico y Economía Cuantitativa, Facultad CCEEUniversidad Complutense MadridPozuelo de AlarcónSpain
  2. 2.Departamento de Análisis Económico y Economía CuantitativaUniversidad Complutense MadridPozuelo de AlarcónSpain
  3. 3.Departamento de Análisis Económico y Economía Cuantitativa and ICEIUniversidad Complutense MadridPozuelo de AlarcónSpain

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