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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

Related research

Keywords: Permit market Oligopoly versus oligopsony Double marginalization;

References

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  1. A. Denny Ellerman & Juan-Pablo Montero, 2005. "The Efficiency and Robustness of Allowance Banking in the U.S. Acid Rain Program," Working Papers 0505, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
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  12. Robert N. Stavins, 1998. "What Can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 69-88, Summer.
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Cited by:
  1. Heindl, Peter, 2012. "Financial intermediaries and emissions trading market development and pricing strategies," ZEW Discussion Papers 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, vol. 51(4), pages 399-407.
  3. Arie ten Cate, 2010. "Hourglass models of world-wide problems such as climate change," CPB Memorandum 238, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Conor Devitt & Richard Tol, 2012. "Oligopoly and Oligopsony Power in the Swedish Market," Working Paper Series 3212, Department of Economics, University of Sussex.
  5. Angelo Antoci & Simone Borghesi & Mauro Sodini, 2012. "ETS and Technological Innovation: A Random Matching Model," Working Papers 2012.79, Fondazione Eni Enrico Mattei.
  6. Montagnoli, Alberto & de Vries, Frans P., 2010. "Carbon trading thickness and market efficiency," Energy Economics, Elsevier, vol. 32(6), pages 1331-1336, November.

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