Bilateral oligopoly in pollution permit markets: Experimental evidence

Journal Article (Journal Article)

We experimentally investigate behavior in a bilateral oligopoly using a supply function equilibria model discussed by Klemperer and Meyer (1989), Hendricks and McAfee (2010), and Malueg and Yates (2009). We focus on the role that market size and the degree of firm heterogeneity have on the market equilibrium. Our results indicate that subjects within the experiment recognize the strategic incentives in a bilateral oligopoly, but they do not exploit these incentives to the exact magnitude predicted by theory. We find weaker support for predicted market outcomes, as market efficiency does not depend on market size, and in some cases buyers or sellers are more successful at extracting the rents from the market. (JEL L13, Q5, C9) © 2014 Western Economic Association International.

Full Text

Duke Authors

Cited Authors

  • Schnier, K; Doyle, M; Rigby, JR; Yates, AJ

Published Date

  • January 1, 2014

Published In

Volume / Issue

  • 52 / 3

Start / End Page

  • 1060 - 1079

Electronic International Standard Serial Number (EISSN)

  • 1465-7295

International Standard Serial Number (ISSN)

  • 0095-2583

Digital Object Identifier (DOI)

  • 10.1111/ecin.12087

Citation Source

  • Scopus