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Collusion in auctions for emission permits: An experimental analysis
Author(s) -
Burtraw Dallas,
Goeree Jacob,
Holt Charles A.,
Myers Erica,
Palmer Karen,
Shobe William
Publication year - 2009
Publication title -
journal of policy analysis and management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.898
H-Index - 84
eISSN - 1520-6688
pISSN - 0276-8739
DOI - 10.1002/pam.20460
Subject(s) - collusion , common value auction , microeconomics , context (archaeology) , unique bid auction , auction theory , revenue , english auction , forward auction , economics , order (exchange) , revenue equivalence , finance , paleontology , biology
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 clock auction. We test the ability of subjects to tacitly or explicitly collude in order to maximize profits. Our main result is that the discriminatory and uniform price auctions produce greater revenues than the clock auction, both with and without explicit communication. The clock appears to facilitate successful collusion, both because of its sequential structure and because it allows bidders to focus on one dimension of cooperation (quantity) rather than two (price and quantity).© 2009 by the Association for Public Policy Analysis and Management.