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Experimental test of the effect of imposing a penalty on buyers in a specific market structure

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  • Ivanova, Galina

Abstract

Using experimental economics tools this paper is testing one of the potential pitfalls in the renewable energy certificates (RECs) market in Australia. Stylised experiment highlighted that sellers' knowledge of the existence of the penalty to buyers for non compliance with mandatory requirements to have a certain number of RECs and the level of penalty in the duopoly market on supply side can push prices for unit of RECs higher than would occur in competitive market without penalty. The level of penalty was used by sellers as a "focal" point for setting the price for the unit.

Suggested Citation

  • Ivanova, Galina, 2007. "Experimental test of the effect of imposing a penalty on buyers in a specific market structure," 2007 Conference (51st), February 13-16, 2007, Queenstown, New Zealand 10360, Australian Agricultural and Resource Economics Society.
    • Handle: RePEc:ags:aare07:10360
    DOI: 10.22004/ag.econ.10360
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    File URL: https://ageconsearch.umn.edu/record/10360/files/cp07iv01.pdf
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    Cited by:

    1. Restiani, Phillia & Betz, Regina, 2010. "The Effects of Penalty Design on Market Performance: Experimental Evidence from an Emissions Trading Scheme with Auctioned Permits," Research Reports 107586, Australian National University, Environmental Economics Research Hub.

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    Keywords

    Marketing;

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