Market Power in an Exhaustible Resource Market

The Case of Storable Pollution Permits

Datos Bibliográficos

ID9705722
AutoresMatti Liski (0000-0002-8313-6231, Helsinki School of Economics, HECER and MIT‐CEEPR), Juan‐Pablo Montero (0000-0002-6815-0158, Pontificia Universidad Catolica de Chile and MIT‐CEEPR)
Año2011
Volumen121
Número551
Páginas116-144
Fecha de publicación2011-03-01
Peer ReviewedSí
Open AccessSí
TipoARTICLE
RevistaThe Economic Journal (JOURNAL)
Identificadores de la revistaISSN: 0013-0133 • E-ISSN: 1468-0297
EditorialOxford University Press (OUP) (PUBLISHER)
DOI10.1111/j.1468-0297.2010.02366.x
OpenAlexW2125068452
IdiomaEN
Citas recibidas3
Referencias citadas23

Motivated by the structure of existing pollution permit markets, we study the equilibrium path that results from allocating an initial stock of storable permits to an agent, or a group of agents, in a position to exercise market power. A large seller of permits exercises market power no differently than a large supplier of an exhaustible resource. However, whenever the large agent's endowment falls short of his efficient endowment – allocation profile that would exactly cover his emissions along the perfectly competitive path – market power is greatly mitigated by a commitment problem, much like in a durable-goods monopoly. We illustrate our theory with two applications: the US sulphur market and the international carbon market that may eventually develop beyond the Kyoto Protocol

Economics · Endowment · Industrial organization · Market power · Market structure · Microeconomics · Monopoly · Resource (disambiguation · Climate Change Policy and Economics · Economic and Environmental Valuation · Energy, Environment, and Transportation Policies