On the efficiency of competitive markets for input quotas: The case of emission permit trading

Arbeitspapier

It is typical for economists and policy makers alike to presume that competitive markets allocate input licenses efficiently. This paper demonstrates that competition in the licenses market cannot assure efficiency when the product market is oligopolistic. We develop a model to provide the conditions under which a bureaucratic mechanism is welfare superior to a marketable input licenses system. Price taking behaviour in the licenses market ensures transfer of licenses to the less efficient firm which becomes more aggressive in the product market. A higher than the welfare maximising number of licenses are traded. When the input and final output technologies are positively correlated, competitive license trading may result in lower output and welfare.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Nota di Lavoro ; No. 93.1999

Classification and Topics

• Classification: Wirtschaft
• Subject: Competitive trading of input quotas ; oligopolistic product markets ; economic efficiency ; Umweltbelastung ; Lizenz ; Oligopol ; Allokationseffizienz ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Sartzetakis, Efticios Sophocles
• Event: Veröffentlichung
• (who): Fondazione Eni Enrico Mattei (FEEM)
• (where): Milano
• (when): 1999

Further information

• Handle: http://hdl.handle.net/10419/155046
• Last update: 10.03.2025, 11:43 AM CET