Mechanisms and Eficiency in Permit Markets
Tesis, Doctorado en Economía, IE-PUC, 2016
Abstract: My thesis analyses mechanisms that we can find in the context of permit markets or water allocation. The first paper analyses the possibility to use the property rights as an instrument to reach efficiency when there is serial correlation and that the initial distribution is an absolute property rights. The third paper is an extension of Cramton-Gibbons-Klemperer (1987) to agents with concave valuations which is generally the case in the context of permits. We show that if agents are symmetric then equal share is one possible
solution. In the case of the root function for two agents, we show that the maximum expected transfer is positive so an efficient mechanism exists. In the second paper, we analyze the effects of the interaction between private information and decision of capital in permit markets. Agents have to invest in a first period and in a second period, they submit a demand schedule for permits and a price is chosen to clear the market. We analyze the effects on the efficiency of the allocation and of the investment. We decompose the
effects to analyze them and we also add the possibility to use subsidy to reach efficiency. Simulations are run as an illustration.