Article

Market Power Effects on Market Equilibrium in Ambient Permit Markets

C.A.E., Université Paul Cézanne, Aix-Marseille III
Topics in Economic Analysis & Policy 02/2007; 7(1). DOI: 10.2202/1935-1682.1433
Source: RePEc

ABSTRACT This paper discusses market power effects in ambient permit markets. We consider a dominant firm in a position to exert market power in several markets. A first conclusion is that the distortion observed on manipulated markets spreads to other markets. We find that the manipulated prices could be lower than their competitive level if the dominant firm acts as a monopolist, and higher if it acts as a monopsonist. We show that the efficient outcome is not reached, except if the number of firms is the same as the number of markets whatever the initial endowment of permits. If not, the efficient outcome can be reached by means of initial endowments.

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