Fees and the efficiency of tradable permit systems: an experimental approach
The paper presents the results of an economic experiment in which the effects of fees on allocative efficiency of tradable utilization permits (e.g. pollution permits) are explored. Laboratory subjects (university students) play the roles of firms whose generic product requires a specific input or permits. Scarcity is exogenously introduced by a fixed supply of tradable production permits. Three treatments are compared: A) no fee imposed; B) a fixed tax per permit; C) partial retraction of permits which are reissued by auction. We regard B and C as two ways of imposing fees. Our results indicate that, after controlling for deviation of permit prices from a prediction based on fundamentals, fees have an impact on distribution of permits. Interestingly, a fixed tax enhances efficiency compared to the case of no fees, while retraction and reallocation by auction reduces efficiency compared to both alternative treatments. Apparently, subjects’ decision making is affected by the imposition of fees, but it matters how such costs are presented or framed.
|Date of creation:||2008|
|Date of revision:||Mar 2009|
|Contact details of provider:|| Postal: |
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Camerer, Colin F & Hogarth, Robin M, 1999.
"The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework,"
Journal of Risk and Uncertainty,
Springer, vol. 19(1-3), pages 7-42, December.
- Camerer, Colin F. & Hogarth, Robin M., 1999. "The Effects of Financial Incentives in Experiments: A Review and Capital-Labor-Production Framework," Working Papers 1059, California Institute of Technology, Division of the Humanities and Social Sciences.
- Kling, Catherine L. & Zhao, Jinhua, 2000.
"On the Long-Run Efficiency of Auctioned vs. Free Permits,"
Staff General Research Papers
1836, Iowa State University, Department of Economics.
- Kling, Catherine L. & Zhao, Jinhua, 2000. "On the long-run efficiency of auctioned vs. free permits," Economics Letters, Elsevier, vol. 69(2), pages 235-238, November.
- Stavins, Robert, 2004.
Working Paper Series
rwp04-051, Harvard University, John F. Kennedy School of Government.
- Cason, Timothy N. & Gangadharan, Lata, 2006.
"Emissions variability in tradable permit markets with imperfect enforcement and banking,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 61(2), pages 199-216, October.
- Timothy N. Cason & Lata Gangadharan, 2004. "Emissions Variability in Tradable Permit Markets with Imperfect Enforcement and Banking," Department of Economics - Working Papers Series 917, The University of Melbourne.
- Cameron, A. Colin & Trivedi, Pravin K., 1990. "Regression-based tests for overdispersion in the Poisson model," Journal of Econometrics, Elsevier, vol. 46(3), pages 347-364, December.
- Kagel, John H & Levin, Dan, 2001. "Behavior in Multi-unit Demand Auctions: Experiments with Uniform Price and Dynamic Vickrey Auctions," Econometrica, Econometric Society, vol. 69(2), pages 413-54, March.
- Porter, David P & Smith, Vernon L, 1995. "Futures Contracting and Dividend Uncertainty in Experimental Asset Markets," The Journal of Business, University of Chicago Press, vol. 68(4), pages 509-41, October.
- Stavins, Robert, 2000.
"Experience with Market-Based Environmental Policy Instruments,"
Working Paper Series
rwp00-004, Harvard University, John F. Kennedy School of Government.
- Stavins, Robert N., 2003. "Experience with market-based environmental policy instruments," Handbook of Environmental Economics, in: K. G. Mäler & J. R. Vincent (ed.), Handbook of Environmental Economics, edition 1, volume 1, chapter 9, pages 355-435 Elsevier.
- Stavins, Robert, 2001. "Experience with Market-Based Environmental Policy Instruments," Discussion Papers dp-01-58, Resources For the Future.
- Montgomery, W. David, 1972. "Markets in licenses and efficient pollution control programs," Journal of Economic Theory, Elsevier, vol. 5(3), pages 395-418, December.
- John List, 2004.
"Neoclassical theory versus prospect theory: Evidence from the marketplace,"
Framed Field Experiments
00174, The Field Experiments Website.
- John A. List, 2004. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," Econometrica, Econometric Society, vol. 72(2), pages 615-625, 03.
- John A. List, 2003. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," NBER Working Papers 9736, National Bureau of Economic Research, Inc.
- Pezzey, John C.V., 2003.
"Emission Taxes and Tradable Permits: A Comparison of Views on Long Run Efficiency,"
2003 Conference (47th), February 12-14, 2003, Fremantle, Australia
58198, Australian Agricultural and Resource Economics Society.
- John Pezzey, 2003. "Emission Taxes and Tradeable Permits A Comparison of Views on Long-Run Efficiency," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(2), pages 329-342, October.
- John C. V. Pezzey, 2002. "EmissionTaxes and Tradable Permits: A Comparison of views on Long Run Efficiency," Economics and Environment Network Working Papers 0210, Australian National University, Economics and Environment Network.
- Matthíasson, Thórólfur, 2001.
"The Icelandic debate on the case for a fishing fee: a non-technical introduction,"
Elsevier, vol. 25(4), pages 303-312, July.
- Thorolfur Matthiasson, 2000. "The Icelandic debate on the case for a fishing fee: A non- technical introduction," Industrial Organization 0004004, EconWPA.
- Sunder, S., 1992. "Experimental Asset Markets: A Survey," GSIA Working Papers 1992-19, Carnegie Mellon University, Tepper School of Business.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Vernon L. Smith, 1962.
"An Experimental Study of Competitive Market Behavior,"
Journal of Political Economy,
University of Chicago Press, vol. 70, pages 111.
- Vernon L. Smith, 1962. "An Experimental Study of Competitive Market Behavior," Journal of Political Economy, University of Chicago Press, vol. 70, pages 322.
- Murphy, James J. & Stranlund, John K., 2006. "Direct and market effects of enforcing emissions trading programs: An experimental analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 217-233, October.
- Anderson, Christopher M. & Sutinen, Jon G., 2006. "The effect of initial lease periods on price discovery in laboratory tradable fishing allowance markets," Journal of Economic Behavior & Organization, Elsevier, vol. 61(2), pages 164-180, October.
- David Porter & Vernon Smith, 1994. "Stock market bubbles in the laboratory," Applied Mathematical Finance, Taylor & Francis Journals, vol. 1(2), pages 111-128.
- Portney, Paul & Oates, Wallace, 2001.
"The Political Economy of Environmental Policy,"
dp-01-55, Resources For the Future.
- Baldursson, Fridrik M & von der Fehr, N.-H.M.Nils-Henrik M, 2004. "Price volatility and risk exposure: on market-based environmental policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 682-704, July.
- Hepburn, C. & Grubb, M. & Neuhoff, K. & Matthes , F. & Tse, M., 2006.
"Auctioning of EU ETS Phase II allowances: how and why?,"
Cambridge Working Papers in Economics
0644, Faculty of Economics, University of Cambridge.
- Cameron Hepburn & Michael Grubb & Karsten Neuhoff & Felix Matthes & Maximilien Tse, 2006. "Auctioning of EU ETS phase II allowances: how and why?," Climate Policy, Taylor & Francis Journals, vol. 6(1), pages 137-160, January.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:14182. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.