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Market power, private information, and the optimal scale of pollution permit markets with application to North Carolina's Neuse River

Publication ,  Journal Article
Yates, AJ; Doyle, MW; Rigby, JR; Schnier, KE
Published in: Resource and Energy Economics
September 1, 2013

We extend the analysis of optimal scale in pollution permit markets by allowing for both market power and private information. We characterize the total costs (abatement costs and damages) under market power and private information and compare them to total costs under competition. It is possible for both market power and private information to lead to lower total costs than competition, but generally the differences between the three market structures will be small. We also conduct an optimal scale analysis of nitrogen pollution from waste water treatment plants (WWTP) into North Carolina's Neuse River System. An economic model of damages and abatement costs is integrated with a hydro-ecological model of nitrogen flow through the Neuse. We determine the optimal number of trading zones and allocate the WWTP into these zones. Under the most likely regulatory scenario, we find cost savings of 1.55 million dollars per year under the optimal market design relative to the typical 303(d) regulation in which the WWTP are not allowed to trade. © 2013 Elsevier B.V.

Duke Scholars

Published In

Resource and Energy Economics

DOI

ISSN

0928-7655

Publication Date

September 1, 2013

Volume

35

Issue

3

Start / End Page

256 / 276

Related Subject Headings

  • Strategic, Defence & Security Studies
  • 1505 Marketing
  • 1403 Econometrics
  • 1402 Applied Economics
 

Citation

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Yates, A. J., Doyle, M. W., Rigby, J. R., & Schnier, K. E. (2013). Market power, private information, and the optimal scale of pollution permit markets with application to North Carolina's Neuse River. Resource and Energy Economics, 35(3), 256–276. https://doi.org/10.1016/j.reseneeco.2013.02.003
Yates, A. J., M. W. Doyle, J. R. Rigby, and K. E. Schnier. “Market power, private information, and the optimal scale of pollution permit markets with application to North Carolina's Neuse River.” Resource and Energy Economics 35, no. 3 (September 1, 2013): 256–76. https://doi.org/10.1016/j.reseneeco.2013.02.003.
Yates AJ, Doyle MW, Rigby JR, Schnier KE. Market power, private information, and the optimal scale of pollution permit markets with application to North Carolina's Neuse River. Resource and Energy Economics. 2013 Sep 1;35(3):256–76.
Yates, A. J., et al. “Market power, private information, and the optimal scale of pollution permit markets with application to North Carolina's Neuse River.” Resource and Energy Economics, vol. 35, no. 3, Sept. 2013, pp. 256–76. Scopus, doi:10.1016/j.reseneeco.2013.02.003.
Yates AJ, Doyle MW, Rigby JR, Schnier KE. Market power, private information, and the optimal scale of pollution permit markets with application to North Carolina's Neuse River. Resource and Energy Economics. 2013 Sep 1;35(3):256–276.
Journal cover image

Published In

Resource and Energy Economics

DOI

ISSN

0928-7655

Publication Date

September 1, 2013

Volume

35

Issue

3

Start / End Page

256 / 276

Related Subject Headings

  • Strategic, Defence & Security Studies
  • 1505 Marketing
  • 1403 Econometrics
  • 1402 Applied Economics