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| Title: | | Initial Allocation Effects in Permit Markets with Bertrand Output Oligopoly  |
| Authors: | | Betz, Regina Calford, Evan M. Heinzel, Christoph |
| Issue Date: | | 2010 |
| Series/Report no.: | | Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Regulating Related Industries E9-V3 |
| Abstract: | | We analyse the efficiency effects of the initial permit allocation given to firms with market power in both permit and output market. We examine two models: a long-run model with endogenous technology and capacity choice, and a short-run model with fixed technology and capacity. In the long run, quantity pre-commitment with Bertrand competition can yield Cournot outcomes also under emissions trading. In the short run, Bertrand output competition reproduces the effects derived under Cournot competition, but displays higher pass-through profits. In a second-best setting of overallocation, a tighter emissions target tends to improve permit-market efficiency in the short run. |
| Subjects: | | emissions trading initial permit allocation Bertrand competition EU ETS endogenous technology choice Kreps and Scheinkman |
| JEL: | | L13 Q28 D43 |
| Document Type: | | Conference Paper |
| Appears in Collections: | | Jahrestagung des Vereins für Socialpolitik 2010 (Kiel): Ökonomie der Familie
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