Charlie Holt (University of Virginia)

Collusion in Auctions for Emission Permits: An Experimental Analysis

Abstract: Environmental markets have several institutional features that provide a new context for the use of auctions and which 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 without and with 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).

Veronika Nemes (Australian Government)

Abstract: Energy use in households is a function of both infrastructure and behaviour. For rented properties, the landlord has control over the infrastructure of a house while the tenant has control over their use of this infrastructure. Because tenants pay utilities bills, the incentive for landlords to invest in energy efficiency infrastructure is reduced compared to the owner occupier case, where the landlord-owner reaps the efficiency benefit of the investment. The setting is a posted offer market where buyers and sellers (tenants and landlords) can lease and asset (property) with a running cost (electricity). Asset owners can vary the levels of investments which changes the running cost for the buyers. There are 5 different levels of investments (similar to “quality grades” in other experiments) and two types of buyers and sellers. The paper compares five policy options against the owner-occupier benchmark (e.g. mandatory minimum standard, voluntary and mandatory disclosure, bill splitting) to overcome the split incentives problem.