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Optimal Two‐Part Pricing in a Carbon Offset Market: A Comparison of Organizational Types
Author(s) -
Fulton Murray,
Vercammen James
Publication year - 2009
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.4284/sej.2009.76.2.513
Subject(s) - offset (computer science) , counterintuitive , microeconomics , profit (economics) , industrial organization , carbon offset , constructive , economics , pricing strategies , supply chain , association (psychology) , business , marketing , computer science , ecology , philosophy , epistemology , process (computing) , climate change , biology , programming language , operating system
This article examines the optimal two‐part pricing by an intermediary in a carbon offset market. In addition to creating a framework for analyzing carbon offset pricing, this article makes two contributions to the theoretical literature. First, we provide an in‐depth examination of the roles played by the upstream inframarginal supply and participation elasticities and the downstream demand elasticity in determining the optimal two‐part pricing strategy. Second, we compare the pricing decisions of three different organizational types: a for‐profit firm, a public agency, and a producer association. The producer association problem, which has received little attention in the literature, yields counterintuitive results because a producer association must simultaneously reduce output and distribute all profits back to its members.