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Which performs better under a trader setting, double auction or uniform price auction?

Author

Listed:
  • Koji Kotani

    (School of Economics and Management, Kochi University of Technology)

  • Kenta Tanaka

    (Faculty of Economics, Musashi University)

  • Shunsuke Managi

    (Departments of Urban and Environmental Engineering, School of Engineering, Kyushu University)

Abstract

A marketable permit system (MPS) has been suggested as solutions to environmental problems. Whereas properties of MPSs in non-trader settings (each player becomes either a seller or a buyer) are well-documented, little is explored about how MPSs perform in trader settings (each player can be both a seller and a buyer). We instituted two auctions of trader settings in MPS experiments: double auction (DA) and uniform price auction (UPA), obtaining the following results: UPAs are more efficient and generate more stable prices than DAs; UPAs induce subjects to more truthfully reveal information about abatement costs for emissions; and a considerable proportion of trades in DAs consist of speculation. Thus, UPAs are likely to work better than DAs in trader settings.

Suggested Citation

  • Koji Kotani & Kenta Tanaka & Shunsuke Managi, 2015. "Which performs better under a trader setting, double auction or uniform price auction?," Working Papers SDES-2015-17, Kochi University of Technology, School of Economics and Management, revised May 2015.
    • Handle: RePEc:kch:wpaper:sdes-2015-17
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    References listed on IDEAS

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    Cited by:

    1. Timothy N. Cason & John K. Stranlund & Frans P. de Vries, 2022. "Investment Incentives in Tradable Emissions Markets with Price Floors Approach," Purdue University Economics Working Papers 1331, Purdue University, Department of Economics.
    2. Xu, Shuang & Zhao, Yong & Li, Yuanzheng & Zhou, Yue, 2021. "An iterative uniform-price auction mechanism for peer-to-peer energy trading in a community microgrid," Applied Energy, Elsevier, vol. 298(C).
    3. Katerina Sherstyuk & Krit Phankitnirundorn & Michael J. Roberts, 2021. "Randomized double auctions: gains from trade, trader roles, and price discovery," Experimental Economics, Springer;Economic Science Association, vol. 24(4), pages 1325-1364, December.
    4. Tanaka, Kenta & Matsukawa, Isamu & Managi, Shunsuke, 2020. "An experimental investigation of bilateral oligopoly in emissions trading markets," China Economic Review, Elsevier, vol. 59(C).
    5. Higashida, Keisaku & Tanaka, Kenta & Managi, Shunsuke, 2019. "The efficiency of conservation banking schemes with inter-regionally tradable credits and the role of mediators," Economic Analysis and Policy, Elsevier, vol. 62(C), pages 175-186.
    6. Wang, Juan & Zheng, Junjun & Yu, Liukai & Goh, Mark & Tang, Yunying & Huang, Yongchao, 2023. "Distributed Reputation-Distance iterative auction system for Peer-To-Peer power trading," Applied Energy, Elsevier, vol. 345(C).

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    More about this item

    Keywords

    marketable permits; economic experiments; double auction; uniform price auction; trader settings;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

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