Objective – This chapter examines the performance of the market to discover efficient equilibrium under alternative auction designs. Background – Auctions are increasingly being used to allocate emissions allowances (“permits”) for cap and trade and common-pool resource management...

Environmental markets have several institutional features that provide a new context for the use of auctions and that have not been studied previously. This paper reports on laboratory experiments testing three auction forms-uniform and discriminatory price sealed-bid auctions and an ascending...

Quantal Response Equilibrium presents a stochastic theory of games that unites probabilistic choice models developed in psychology and statistics with the Nash equilibrium approach of classical game theory. Nash equilibrium assumes precise and perfect decision making in games, but human behavior...

We experimentally study auctions versus grandfathering in the initial assignment of pollution permits that can be traded in a secondary spot market. Low and high emitters compete for permits in the auction, whereas permits are assigned for free under grandfathering. In theory, trading in the...