Market power in a storable-good market : theory and applications to carbon and sulfur trading
Author(s)
Liski, Matti; Montero, Juan-Pablo
Download2005-016.pdf (447.1Kb)
Other Contributors
Massachusetts Institute of Technology. Center for Energy and Environmental Policy Research.
Metadata
Show full item recordAbstract
We consider a market for storable pollution permits in which a large agent and a fringe of small agents gradually consume a stock of permits until they reach a long-run emissions limit. The subgame-perfect equilibrium exhibits no market power unless the large agent's share of the initial stock of permits exceeds a critical level. We then apply our theoretical results to a global market for carbon dioxide emissions and the existing US market for sulfur dioxide emissions. We characterize competitive permit allocation profiles for the carbon market and find no evidence of market power in the sulfur market.
Date issued
2005Publisher
MIT Center for Energy and Environmental Policy Research
Other identifiers
2005-016
Series/Report no.
MIT-CEEPR (Series) ; 05-016WP.