Collusion in Auctions for Emission Permits: An Experimental Analysis
RFF Discussion Paper No. 08-36
Journal of Policy Analysis and Management, Vol. 28, No. 4, pp.672-691, 2009
24 Pages Posted: 16 Oct 2008 Last revised: 8 Jun 2010
Date Written: September 23, 2008
Abstract
Environmental markets have several institutional features that provide a new context for the use of auctions and which 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 without and with explicit communication. The clock appears to be more subject to successful collusion because of its sequential structure and because it allows bidders to focus on one dimension of cooperation (quantity) rather than two (price and quantity).
Keywords: auctions, collusion, experiments, carbon dioxide, greenhouse gases
JEL Classification: C92, D43, D44
Suggested Citation: Suggested Citation
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