Information and Pollution Permit Markets: Another View

In a recent article, Smith and Yates (2003) argued that regulators could gain additional information about the optimal number of permits to issue from two-sided markets. The author argues that they are incorrect in their assertion because the market they refer to is an asymmetric two-sided market in which individuals are only allowed to decrease the number of permits. When a symmetric two-sided market is considered, the public good nature of the problem makes it unlikely that any useful information can come from a two-sided market.