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Discriminatory auctions lead to lower allowance prices: evidence from the United States

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Listed:
  • Yu Xia

    (Department of Economics, Syracuse University)

Abstract

This study develops an equilibrium strategy for specific auction scenarios by optimizing the Symmetric Independent Private Value model to analyze the behavior of buyers and sellers throughout the auction process, examine the price and quantity proportion of sulfur dioxide auctions, and ascertain the impact of discriminatory auction forms on low auction prices. The results indicate that agents have incentives to lower prices, discriminatory auctions adversely affect allowance prices, and common value and market concentration further undermine the effectiveness of the auction mechanism.

Suggested Citation

  • Yu Xia, 2025. "Discriminatory auctions lead to lower allowance prices: evidence from the United States," Economics Bulletin, AccessEcon, vol. 45(4), pages 1735-1743.
    • Handle: RePEc:ebl:ecbull:eb-25-00379
    as

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    References listed on IDEAS

    as
    1. Richard Schmalensee & Robert N. Stavins, 2025. "Policy Evolution under the Clean Air Act," World Scientific Book Chapters, in: Economics of Environment, Climate Change, and Wine Selected Papers of Robert N Stavins Volume 3 (2011–2023), chapter 10, pages 267-298, World Scientific Publishing Co. Pte. Ltd..
    2. Hitaj, Claudia & Stocking, Andrew, 2016. "Market efficiency and the U.S. market for sulfur dioxide allowances," Energy Economics, Elsevier, vol. 55(C), pages 135-147.
    3. Damianov, Damian S. & Becker, Johannes Gerd, 2010. "Auctions with variable supply: Uniform price versus discriminatory," European Economic Review, Elsevier, vol. 54(4), pages 571-593, May.
    4. Jackson, Matthew O. & Kremer, Ilan, 2007. "On the informational inefficiency of discriminatory price auctions," Journal of Economic Theory, Elsevier, vol. 132(1), pages 507-517, January.
    5. Atakan, Alp E. & Ekmekci, Mehmet, 2024. "The role of information in auctions," Journal of Mathematical Economics, Elsevier, vol. 114(C).
    6. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    7. Karl Hausker, 1992. "The politics and economics of auction design in the market for sulfur dioxide pollution," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 11(4), pages 553-572.
    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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