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Double Auction experiments and their relevance for emissions trading

In: Emissions Trading

Author

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  • Bodo Sturm

    (Centre for European Economic Research (ZEW))

Abstract

In this article, we discuss selected methodological problems from previous Double Auction (DA) experiments and analyze the two following questions experimentally. Firstly, does the framing of the decision situation influence the behavior in an emissions trading experiment? Secondly, is the Multiple Unit Double Auction (MUDA) able to suppress market power when the buying or selling side is highly concentrated? Based on a larger number of independent observations than analyzed in previous studies, the experiment generates two main results. Firstly, the framing of the decision situation does not influence the behavior of subjects. Secondly, the emissions trading market realizes a high degree of efficiency even under market power conditions. However, the MUDA is not able to restrict market power. We observe persistent price discrimination in both market power environments, i.e. the distribution of profits is strongly shifted in favor of the strong market side without greatly harming efficiency.

Suggested Citation

  • Bodo Sturm, 2008. "Double Auction experiments and their relevance for emissions trading," Springer Books, in: Ralf Antes & Bernd Hansjürgens & Peter Letmathe (ed.), Emissions Trading, pages 49-68, Springer.
    • Handle: RePEc:spr:sprchp:978-0-387-73653-2_4
    DOI: 10.1007/978-0-387-73653-2_4
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    Cited by:

    1. Requate, Till & Camacho-Cuena, Eva & Kean Siang, Ch'ng & Waichman, Israel, 2019. "Tell the truth or not? The montero mechanism for emissions control at work," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 133-152.
    2. Veronika Grimm & Lyuba Ilieva, 2013. "An experiment on emissions trading: the effect of different allocation mechanisms," Journal of Regulatory Economics, Springer, vol. 44(3), pages 308-338, December.

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