Bidders in these auctions acquire "permits,"
e.g. emissions allowances or other licenses.
Bidding takes place in "rounds,"
with a cutoff price that is either clock driven or bid driven, and with prices that
either increase or decrease (Dutch). Single-round
sealed bid procedures and continuous-time formats are also available, with either uniform or "discriminatory" prices.
The "shot clock" hybrid starts as an ascending price clock and ends with a
single-round first-price "shootout" among those bidders that are still active
in the auction when the number of permits requested reaches a target cutoff.
Other setup options include asymmetries in costs and permit needs,
the presence of permit banking, secondary "spot"
markets, a chat room for collusive disucssions, free "grandfathered" permit
allocations, and the amount of inforrmation
that is revealed after each round of bidding.
| || || || || ||This graph shows the effects of an unanticipated demand shift for allowances after the third auction, which caused a change in the Walrasian price prediction (gray line) that was tracked by the clearing prices in a series of clock auctions. This program was used to design auctions for the Regional Greenhouse Gas Initiative (RGGI).
Vecon Lab - December 7, 2022