Research On Price Discovery And Efficiency Of Emission Trading Market Based On Consignment Auction

The good operation of the market depends on the effective initial allocation mech-anism.Consignment auction is a novel allocation mechanism of pollution permits.It follows revenue-neutral principal which requires firms consign their permits endowed initially into a uniform-price auction to reallocate,and get payment or payoff through the clearing price.Consignment auction is implemented in some parts of the United States for years,but its theoretical model has not been fully studied.Based on the assumption of private information and diminishing marginal value,we model the consignment auction and solve the interim equilibrium.In this paper,consignment auction is divided into two opposing forces:selling endowment and purchasing license,and some special prop-erties of consignment auction are explored.Firstly,the mechanism can reallocate the initial allocation.Secondly,there may be a special phenomenon of demand increase of high endowed bidders.Finally,with the number of bidders increasing,it will converge towards fully competitive market.Furthermore,we use ex-post equilibrium as a special case of multiple equilibrium to compare the consignment auction with the classical mechanisms.It is concluded that consignment auction can realize price discovery,but it is usually inefficient ex post,and the efficiency ranks between uniform-price auction and grandfathering.Thcn we dis-cuss the reality that proportional consignment auction is actually the weighted sum of the consignment auction and the uniform-price auction,and that allowing free decisions does not affect the equilibrium result,and that the reserve price should be determined carefully.Finally,we summarize the choice of policy tools,and the consignment auc-tion is superior.