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Consignment auctions

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Abstract

This article investigates pollution permit consignment auctions. In this process firms obtain an initial endowment of permits that must be consigned to the auctioneer for sale. In the auction, firms bid for permits, obtain their equilibrium permit allocations, and receive revenue from their consigned permits. The main justifications for this auction are that it is politically attractive and generates clear price discovery. Yet we show this auction provides no clear price signal: in equilibrium, firms demand their own initial endowments and their payoffs are independent of the clearing price. Our results have policy implications for the California Cap-and-Trade Program.

Suggested Citation

  • Peyman Khezr & Ian A. MacKenzie, 2016. "Consignment auctions," Discussion Papers Series 558, School of Economics, University of Queensland, Australia.
  • Handle: RePEc:qld:uq2004:558
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    File URL: http://www.uq.edu.au/economics/abstract/558.pdf
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    Cited by:

    1. Leal, Mariel & Garcia, Arturo & Lee, Sang-Ho, 2018. "Excess burden of taxation and environmental policy mix with a consumer-friendly firm," MPRA Paper 88256, University Library of Munich, Germany, revised 2018.
    2. repec:eee:enepol:v:107:y:2017:i:c:p:337-344 is not listed on IDEAS
    3. Peyman Khezr & Ian A. MacKenzie, 2018. "An efficient and implementable auction for environmental rights," Discussion Papers Series 587, School of Economics, University of Queensland, Australia.

    More about this item

    Keywords

    permit auction; consignment;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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