A Simple Auction Mechanism for the Optimal Allocation of the Commons
Abstract
Efficient regulation of the commons requires information about the regulated firms that is rarely available to regulators (e.g., cost of pollution abatement). This paper proposes a simple mechanism that implements the first-best for any number of firms: a uniform price, sealed-bid auction of an endogenous number of (transferable) licenses with a fraction of the auction revenues given back to firms. Paybacks, which rapidly decrease with the number of firms, are such that truth-telling is a dominant strategy regardless of whether firms behave non-cooperatively or collusively. The mechanism also provides firms with incentives to invest in socially optimal R&D. (JEL D44, L51, Q21)Download Info
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Bibliographic Info
Article provided by American Economic Association in its journal American Economic Review.
Volume (Year): 98 (2008)
Issue (Month): 1 (March)
Pages: 496-518
Note: DOI: 10.1257/aer.98.1.496
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Related research
Keywords:Other versions of this item:
- Juan-Pablo Montero, 2006. "A simple auction mechanism for the optimal allocation of the commons," Working Papers 0608, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Juan Pablo Montero, 2006. "A Simple Auction Mechanism for the Optimal Allocation of the Commons," Documentos de Trabajo 311, Instituto de Economia. Pontificia Universidad Católica de Chile..
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
References
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Enrique Calfucura & Jessica Coria & José Miguel Sánchez, 2008. "Permisos Transables de Emisión en Chile: Lecciones, Desafíos y Oportunidades para Países en Desarrollo," Documentos de Trabajo 347, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Juan-Pablo Montero, 2009.
"Market Power in Pollution Permit Markets,"
Working Papers
0906, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
- Juan Pablo Montero, 2009. "Market Power in Pollution Permit Markets," Documentos de Trabajo 355, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Juan-Pablo Montero, 2011. "Cuotas de Pesca y Libre Competencia: Algunas Reflexiones para la Nueva Ley de Pesca," Documentos de Trabajo 405, Instituto de Economia. Pontificia Universidad Católica de Chile..
- Sonia Schwartz, 2009. "Comment distribuer les quotas de pollution ?. Une revue de la littérature," Revue d'économie politique, Dalloz, vol. 0(4), pages 535-568.
- Hans Gersbach & Ralph Winkler, 2008.
"International Emission Permit Markets with Refunding,"
CER-ETH Economics working paper series
08/97, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
- Gersbach, Hans & Winkler, Ralph, 2011. "International emission permit markets with refunding," European Economic Review, Elsevier, vol. 55(6), pages 759-773, August.
- Gersbach, Hans & Winkler, Ralph, 2008. "International Emission Permit Markets with Refunding," CEPR Discussion Papers 7035, C.E.P.R. Discussion Papers.
- Thierry Brechet & Pierre M. Picard, 2008.
"The Price of Silence: Markets for Noise Licenses and Airports,"
CREA Discussion Paper Series
08-08, Center for Research in Economic Analysis, University of Luxembourg.
- Thierry Bréchet & Pierre M. Picard, 2010. "The Price Of Silence: Markets For Noise Licenses And Airports," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(4), pages 1097-1125, November.
- Suzi Kerr, 2012. "This paper provides a synthesis of the key conceptual insights from economics that can contribute to the design of effective, efficient, and fair international policy that creates incentives and stren," Working Papers 12_12, Motu Economic and Public Policy Research.
- Juan Pablo Montero, 2007. "An Auction Mechanism for the Commons: Some Extensions," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 44(130), pages 141-150.
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