A tradeable permits market is said to be efficient when all affected firms trade permits until their marginal costs equal the market price. Detailed firm-level data are generally required to perform such an efficiency test, yet such information is rarely available. If firms face a declining...

We consider a market for storable pollution permits in which a large agent and a fringe of small agents gradually consume a stock of permits until they reach a long-run emissions limit. The subgame-perfect equilibrium exhibits no market power unless the large agent’s share of the initial stock...

I study the design of environmental policies for a regulator that has incomplete information on firms’ emissions and costs of production and abatement (e.g., air pollution in cities with numerous small polluting sources). Because of incomplete information on emissions, there is no policy that...

Following the structure of many commodity markets, we consider a few large firms and a competitive fringe of many small suppliers choosing quantities in an infinite-horizon setting subject to demand shocks. We show that a collusive agreement among the large firms may not only bring an output...

In this paper we discuss second-generation electricity reforms being formulated in Latin America and how they are being reshaped by the California crisis, which had stood as a paradigm, at least in theory, for fully competitive markets. We argue that the main lesson policy makers in Latin...

I study a regulatory process in which both the regulator and the regulated firm propose prices that in case of disagreement are settled through final-offer arbitration – a practice currently used in Chile for setting prices in the water sector. Rather than submitting a single offer, each party...

We study the static and dynamic implications of non-linear pricing schemes (i.e., bundling) for otherwise unrelated products but for multimarket contact. Bundling is always present in competition but unlikely in a cartel agreement. Although it brings extra profits to the cartel –sometimes...

This study investigates when a cartel that uses a sales quota allocation scheme monitors more frequently than it enforces; for example, monitoring of sales is done on a weekly basis but firms are only required to comply with sales quotas on a quarterly basis. In a simple three-period quantity...

In an effort to reduce pollution and congestion, Latin American cities have experimented with different policies to persuade drivers to give up their cars in favor of public transport. Borrowing from the bundling literature, the paper presents a novel model of vertical and horizontal...

It has been long recognized that an exhaustible-resource monopsonist faces a commitment problem similar to that of a durable-good monopolist. Indeed, Hörner and Kamien (2004) demonstrate that the two problems are formally equivalent under full commitment. We show that there is no such...