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

See all articles by Dallas Burtraw

Dallas Burtraw

Resources for the Future

Jacob K. Goeree

University of Zurich

Charles A. Holt

University of Virginia - Department of Economics

Erica C. Myers

Resources for the Future

Karen L. Palmer

Resources for the Future

William Shobe

University of Virginia - Center for Economic and Policy Studies; Frank Batten School of Leadership and Public Policy

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

Burtraw, Dallas and Goeree, Jacob K. and Holt, Charles A. and Myers, Erica C. and Palmer, Karen and Shobe, William, Collusion in Auctions for Emission Permits: An Experimental Analysis (September 23, 2008). RFF Discussion Paper No. 08-36, Journal of Policy Analysis and Management, Vol. 28, No. 4, pp.672-691, 2009, Available at SSRN: https://ssrn.com/abstract=1272713 or http://dx.doi.org/10.2139/ssrn.1272713

Dallas Burtraw (Contact Author)

Resources for the Future ( email )

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Jacob K. Goeree

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

HOME PAGE: http://www.econ.uzh.ch/faculty/jgoeree.html

Charles A. Holt

University of Virginia - Department of Economics ( email )

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Erica C. Myers

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Karen Palmer

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

William Shobe

University of Virginia - Center for Economic and Policy Studies ( email )

Box 400206
Charlottesville, VA 22904-4206
United States
434-982-5376 (Phone)

HOME PAGE: http://www.virginia.edu/ceps

Frank Batten School of Leadership and Public Policy ( email )

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Charlottesville, VA 22904-4893
United States
434-982-5376 (Phone)

HOME PAGE: http://people.virginia.edu/~wms5f

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