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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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    File URL: http://www.souken.kochi-tech.ac.jp/seido/wp/SDES-2015-17.pdf
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    References listed on IDEAS

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    Keywords

    marketable permits; economic experiments; double auction; uniform price auction; trader settings;

    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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