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Oligopoly meets oligopsony: The case of permits

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  • Wirl, Franz

Abstract

This paper derives market equilibria (in demand functions and in bidding strategies) between oligopolists and oligopsonists in a market with intermediates and no competition in final markets. To the best of my knowledge, this theme has not been explored, despite two observations: Firstly, the commonly applied framework of non-competitive and competitive fringe firms has implausible properties for the limit of purely strategic players. Secondly, real world cases correspond at least potentially to such strategic interactions, e.g., non-competitive players selling and buying permits (CO2 and SO2). The major implications are that these non-competitive markets are characterized by a kind of double marginalization (on the demand and the supply side) resulting in too little trade and wrong price signals.

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  • Wirl, Franz, 2009. "Oligopoly meets oligopsony: The case of permits," Journal of Environmental Economics and Management, Elsevier, vol. 58(3), pages 329-337, November.
    • Handle: RePEc:eee:jeeman:v:58:y:2009:i:3:p:329-337
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    Cited by:

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    4. Heindl, Peter, 2012. "Financial intermediaries and emissions trading market development and pricing strategies," ZEW Discussion Papers 12-064, ZEW - Leibniz Centre for European Economic Research.
    5. Wang, Xu & Zhu, Lei & Liu, Pengfei, 2021. "Manipulation via endowments: Quantifying the influence of market power on the emission trading scheme," Energy Economics, Elsevier, vol. 103(C).
    6. Tanaka, Kenta & Matsukawa, Isamu & Managi, Shunsuke, 2020. "An experimental investigation of bilateral oligopoly in emissions trading markets," China Economic Review, Elsevier, vol. 59(C).
    7. Alex Dickson & Ian A. MacKenzie, 2022. "Permit Markets with Political and Market Distortions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 82(1), pages 227-255, May.
    8. Holland, Daniel S. & Thunberg, Eric & Agar, Juan & Crosson, Scott & Demarest, Chad & Kasperski, Stephen & Perruso, Larry & Steiner, Erin & Stephen, Jessica & Strelcheck, Andy & Travis, Mike, 2015. "US catch share markets: a review of data availability and impediments to transparent markets," Marine Policy, Elsevier, vol. 57(C), pages 103-110.
    9. Godal Odd & Meland Frode, 2010. "Permit Markets, Seller Cartels and the Impact of Strategic Buyers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-33, April.
    10. Conor Devitt & Richard Tol, 2012. "Oligopoly and Oligopsony Power in the Swedish Market," Working Paper Series 3212, Department of Economics, University of Sussex Business School.
    11. Antoci, Angelo & Borghesi, Simone & Sodini, Mauro, 2012. "ETS and Technological Innovation: A Random Matching Model," Climate Change and Sustainable Development 139508, Fondazione Eni Enrico Mattei (FEEM).
    12. Eyckmans, Johan & Hagem, Cathrine, 2011. "The European Union's potential for strategic emissions trading through permit sales contracts," Resource and Energy Economics, Elsevier, vol. 33(1), pages 247-267, January.
    13. Omid Sabbaghi & Navid Sabbaghi, 2017. "The Chicago Climate Exchange and market efficiency: an empirical analysis," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 19(4), pages 711-734, October.
    14. Dijkstra, Bouwe R. & Nentjes, Andries, 2020. "Pareto-Efficient Solutions for Shared Public Good Provision: Nash Bargaining versus Exchange-Matching-Lindahl," Resource and Energy Economics, Elsevier, vol. 61(C).
    15. Yates, Andrew J. & Doyle, Martin W. & Rigby, J.R. & Schnier, Kurt E., 2013. "Market power, private information, and the optimal scale of pollution permit markets with application to North Carolina's Neuse River," Resource and Energy Economics, Elsevier, vol. 35(3), pages 256-276.
    16. Sabbaghi, Omid & Sabbaghi, Navid, 2011. "Carbon Financial Instruments, thin trading, and volatility: Evidence from the Chicago Climate Exchange," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(4), pages 399-407.
    17. Corina Haita-Falah, 2016. "Uncertainty and speculators in an auction for emissions permits," Journal of Regulatory Economics, Springer, vol. 49(3), pages 315-343, June.
    18. de, Vries Frans & Montagnoli, Alberto, 2009. "Carbon trading thickness and market efficiency: A non-parametric test," Stirling Economics Discussion Papers 2009-22, University of Stirling, Division of Economics.
    19. Arie ten Cate, 2010. "Hourglass models of world-wide problems such as climate change," CPB Memorandum 238.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    20. Fabio Antoniou & Panos Hatzipanayotou & Nikos Tsakiris, 2021. "Strategic Export Motives and Linking Emission Markets," CESifo Working Paper Series 8847, CESifo.
    21. Montagnoli, Alberto & de Vries, Frans P., 2010. "Carbon trading thickness and market efficiency," Energy Economics, Elsevier, vol. 32(6), pages 1331-1336, November.
    22. Haita, Corina, 2014. "Endogenous market power in an emissions trading scheme with auctioning," Resource and Energy Economics, Elsevier, vol. 37(C), pages 253-278.

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