IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-00437636.html
   My bibliography  Save this paper

Choosing a trading counterpart in the U.S. acid rain market

Author

Listed:
  • Maria Eugénia Sanin

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS - Centre National de la Recherche Scientifique, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain)

Abstract

In this paper we study the determinants of the counterpart choice in the U.S. market for SO2 allowances. Counterparts can be chosen among three alternatives proved to be independent: market makers, brokers or private. Privates are mostly U.S. electricity generators. We find that the SO2 allowances market, as the electricity market, is regionalized. The national dimension only appears when there are local imbalances that give incentives to search for a better price outside of the region. Additionally, our results suggest that agents like counterpart differentiation i.e. they value positively the presence of few market makers, possibly with large stocks but they also value positively the presence of many brokers (and privates). In line with previous literature results, we also find agents prefer market makers when placing large size orders and that the preference for market makers increases on time due to the increase in the counterpart risk. Finally, we also identify the influence of the regulatory framework, i.e. the division in phases and the chosen allowance surrender date, in the counterpart choice. The previous results are robust to Enron's abnormal behavior during 2000-2001 and its posterior bankruptcy.

Suggested Citation

  • Maria Eugénia Sanin, 2009. "Choosing a trading counterpart in the U.S. acid rain market," Working Papers hal-00437636, HAL.
  • Handle: RePEc:hal:wpaper:hal-00437636 Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00437636
    as

    Download full text from publisher

    File URL: https://hal.archives-ouvertes.fr/hal-00437636/document
    Download Restriction: no

    References listed on IDEAS

    as
    1. Small, Kenneth A & Hsiao, Cheng, 1985. "Multinomial Logit Specification Tests," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 619-627, October.
    2. Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
    3. Manski, Charles F, 2001. " Daniel McFadden and the Econometric Analysis of Discrete Choice," Scandinavian Journal of Economics, Wiley Blackwell, pages 217-229.
    4. John Rust & George Hall, 2003. "Middlemen versus Market Makers: A Theory of Competitive Exchange," Journal of Political Economy, University of Chicago Press, pages 353-403.
    5. Igal Hendel & Aviv Nevo & François Ortalo-Magné, 2009. "The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com," American Economic Review, American Economic Association, pages 1878-1898.
    6. Dilip Mookherjee & Debraj Ray, 2005. "Occupational Diversity and Endogenous Inequality," Boston University - Department of Economics - Working Papers Series WP2005-022, Boston University - Department of Economics.
    7. Boskin, Michael J, 1974. "A Conditional Logit Model of Occupational Choice," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages 389-398, Part I, M.
    8. Jianjun Miao, 2006. "A search model of centralized and decentralized trade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(1), pages 68-92, January.
    9. B. Douglas Bernheim & Jonathan Meer, 2013. "Do Real Estate Brokers Add Value When Listing Services Are Unbundled?," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1166-1182, April.
    10. Igal Hendel & Aviv Nevo & François Ortalo-Magné, 2009. "The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com," American Economic Review, American Economic Association, pages 1878-1898.
    11. Joskow, Paul L & Schmalensee, Richard, 1998. "The Political Economy of Market-Based Environmental Policy: The U.S. Acid Rain Program," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 37-83, April.
    12. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Multiproduct Firms, Product Differentiation, and Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
    13. Bessembinder, Hendrik & Kaufman, Herbert M., 1997. "A cross-exchange comparison of execution costs and information flow for NYSE-listed stocks," Journal of Financial Economics, Elsevier, vol. 46(3), pages 293-319, December.
    14. Brad M. Barber & Terrance Odean, 2008. "All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors," Review of Financial Studies, Society for Financial Studies, pages 785-818.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00437636. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.