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Collusion in auctions for emission permits: An experimental analysis


Burtraw, Dallas; Goeree, Jacob K; Holt, Charles A; Myers, Erica; Palmer, Karen L; Shobe, William (2009). Collusion in auctions for emission permits: An experimental analysis. Journal of Policy Analysis and Management, 28(4):672-691.

Abstract

Environmental markets have several institutional features that provide a new context for the use of auctions and that have not been studied previously. This paper reports on laboratory experiments testing three auction forms — niform 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 with and without explicit communication. The clock appears to facilitate successful collusion, both because of its sequential structure and because it allows bidders to focus on one dimension of cooperation (quantity) rather than two (price and quantity).

Abstract

Environmental markets have several institutional features that provide a new context for the use of auctions and that have not been studied previously. This paper reports on laboratory experiments testing three auction forms — niform 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 with and without explicit communication. The clock appears to facilitate successful collusion, both because of its sequential structure and because it allows bidders to focus on one dimension of cooperation (quantity) rather than two (price and quantity).

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2009
Deposited On:18 Jan 2010 12:59
Last Modified:05 Apr 2016 13:34
Publisher:Wiley-Blackwell
ISSN:0276-8739
Publisher DOI:https://doi.org/10.1002/pam.20460

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