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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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Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 58 (2009)
Issue (Month): 3 (November)
Pages: 329-337

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Handle: RePEc:eee:jeeman:v:58:y:2009:i:3:p:329-337

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Web page: http://www.elsevier.com/locate/inca/622870

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Keywords: Permit market Oligopoly versus oligopsony Double marginalization;

References

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Cited by:
  1. Heindl, Peter, 2012. "Financial intermediaries and emissions trading market development and pricing strategies," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 12-064, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. 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, Elsevier, vol. 51(4), pages 399-407.
  3. Montagnoli, Alberto & de Vries, Frans P., 2010. "Carbon trading thickness and market efficiency," Energy Economics, Elsevier, Elsevier, vol. 32(6), pages 1331-1336, November.
  4. 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, Elsevier, vol. 35(3), pages 256-276.
  5. Conor Devitt & Richard Tol, 2012. "Oligopoly and Oligopsony Power in the Swedish Market," Working Paper Series, Department of Economics, University of Sussex 3212, Department of Economics, University of Sussex.
  6. de, Vries Frans & Montagnoli, Alberto, 2009. "Carbon trading thickness and market efficiency: A non-parametric test," Stirling Economics Discussion Papers, University of Stirling, Division of Economics 2009-22, University of Stirling, Division of Economics.
  7. Angelo Antoci & Simone Borghesi & Mauro Sodini, 2012. "ETS and Technological Innovation: A Random Matching Model," Working Papers, Fondazione Eni Enrico Mattei 2012.79, Fondazione Eni Enrico Mattei.
  8. Arie ten Cate, 2010. "Hourglass models of world-wide problems such as climate change," CPB Memorandum, CPB Netherlands Bureau for Economic Policy Analysis 238, CPB Netherlands Bureau for Economic Policy Analysis.

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