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Bilateral Oligopoly, Private Information, and Pollution Permit Markets

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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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Authors and Affiliations

  1. Department of Economics, University of California, Riverside, CA, 92521, USA

    David A. Malueg

  2. Department of Economics, E. Claiborne Robins School of Business, University of Richmond, 1 Gateway Rd., Richmond, VA, 23173, USA

    Andrew J. Yates

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  1. David A. Malueg
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  2. Andrew J. Yates
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Correspondence to Andrew J. Yates.

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Malueg, D.A., Yates, A.J. Bilateral Oligopoly, Private Information, and Pollution Permit Markets. Environ Resource Econ 43, 553–572 (2009). https://doi.org/10.1007/s10640-008-9249-1

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  • DOI: https://doi.org/10.1007/s10640-008-9249-1

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