722 research outputs found
Tradable Permits with Incomplete Monitoring: Evidence from Santiagoās Particulate Permits Program
I explore the advantages of tradable emission permits over uniform emission standards when the regulator has incomplete information on firmsā emissions and costs of production and abatement (e.g., air pollution in large cities). Because the regulator only observes each firmās abatement technology but neither its emissions nor its output, there are cases in which standards can lead to lower emissions and, hence, welfare dominate permits. I then empirically examine these issues using evidence from a particulate permits market in Santiago, Chile
Trading Quasi-emission Permits.Vers. 6/2003
I study the design of environmental policies for a regulator that has incomplete information on firmsā emissions and costs of production and abatement (e.g., air pollution in cities with numerous small polluting sources). Because of incomplete information on emissions, there is no policy that can implement the first-best. Since the regulator can observe firmsā abatement technologies, however, it is possible to design a quasi-emissions trading program based on this information and show that it can provide higher welfare than command-and control regulation such as technology or emission standards. I then empirically examine this claim using evidence from a particulate quasi-emissions trading program in Santiago, Chile.
A model of arbitration in regulation
I study a regulatory process in which both the regulator and the regulated firm propose prices that in case of disagreement are settled through final-offer arbitration ā a practice currently used in Chile for setting prices in the water sector. Rather than submitting a single offer, each party simultaneously submit offers for each of the cost units in which the firm is divided. This multiplicity is believed to be responsible for the great divergence between partiesā offers observed in practice. I show, however, that reducing the number of offers makes little difference unless parties are required to submit a single offerfinal-offer arbitration, price regulation, Nash equilibrium
An Auction Mechanism for the Commons: Some Extensions
Efficient regulation of the commons requires information about the regulated firms that is rarely available to regulators (e.g., cost of pollution abatement). Montero (2008) proposes a simple mechanism for inducing firms to truthfully reveal their privatExternalities, asymmetric information, uniform-price auction
Learning in Final-Offer Arbitration with Multiple Offers
Motivated by the price-setting process of water utilities in Chile, I study a final-offer arbitration game in which two parties simultaneously submits offers for each of the two or more units in which the item in dispute has been divided. The arbitrator is limited to choose one partyās offer or the other for each unit. While the introduction of multiple offers allows the arbitrator to get closer to her ideal settlement it may prompt an arbitrarily large divergence between the partiesā offers. The latter, however, does not affect the arbitratorās ability to learn from the offers.Final-offer arbitration, price regulation, Nash equilibrium
Markets for Environmental Protection; Desing and Performance
Policy makers in different parts of the world are paying more attention to environmental markets (i.e., tradeable emission permits markets) as an alternative to the traditional command-and-command control approach of setting uniform emission and technology standards. I extend the basic (perfect information) model of a permits market to accommodate for practical considerations including regulatorās asymmetric information on firmsā costs, uncertainty on benefits from pollution control, incomplete enforcement, incomplete monitoring of emissions and the possibility of voluntary participation of non-affected sources. Implications for instrument design and implementation are provided.Environmental regulation, permits markets, asymmetric information, incomplete enforcement
A Simple Auction Mechanism for the Optimal Allocation of the Commons
Efficient regulation of the commons requires information about the regulated firms that is rarely available to regulators (e.g., cost of pollution abatement). Different mechanisms have been proposed for inducing firms to reveal their private information but for reasons I discuss in the paper, I find these mechanisms of limited use. I propose a much simpler mechanism that implements the first-best for any number of firms: a uniform price sealed-bid auction of an endogenous number of (transferable) licenses with a fraction of the auction revenues given back to firms. Paybacks, which decrease with the number of firms, are such that truth-telling is a dominant strategy regardless of whether firms behave non-cooperatively or collusively.
Forward Contracting and Collusion in Oligopoly
We consider an infinitely-repeated oligopoly in which at each period firms not only serve the spot market by either competing in prices or quantities but also have the opportunity to trade forward contracts. Contrary to the pro-competitive results of finite-horizon models, we find that the possibility of forward trading allows firms to sustain collusive profits that otherwise would not be possible. The result holds both for price and quantity competition and follows because (collusive) contracting of future sales is more effective in deterring deviations from the collusive plan than in inducing the previously identified pro-competitive effects.
Market Power in Pollution Permit Markets
As with other commodity markets, markets for trading pollution permits have not been immune to market power concerns. In this paper, I survey the existing literature on market power in permit trading but also contribute with some new results and ideas. I start the survey with Hahnās (1984) dominant-firm (static) model that I then extend to the case in which there are two or more strategic firms that may also strategically interact in the output market, to the case in which current permits can be stored for future use (as in most existing and proposed market designs), to the possibility of collusive behavior, and to the case in which permits are auctioned off instead of allocated for free to firms. I finish the paper with a review of empirical evidence on market power, if any, with particular attention to the U.S. sulfur market and the Southern California NOx market.Market power, emissions trading, pollution permits, storable permits
Tradable Permits with Incomplete Monitoring: Evidence from Santiagosās Particulate Permits Programs
I explore the advantages of tradable emission permits over uniform emission standards when the regulator has incomplete information on firmsā emissions and costs of production and abatement (e.g., air pollution in large cities). Because the regulator only observes each firmās abatement technology but neither its emissions nor its output, there are cases in which standards can lead to lower emissions and, hence, welfare dominate permits. I then empirically examine these issues using evidence from a particulate permits market in Santiago, Chile.Asymmetric information, imperfect monitoring, pollution markets, permits
- ā¦