Efficient Auction Mechanisms for Carbon Emission Rights Allocation

Abstract

This paper examines bidders' bidding behavior and carbon emission rights allocations under the English auction with "going, going, gone" ending rule and the sequential ascending auction, respectively. Given the definitions of demand correspondence and efficient allocation, we obtain that: (1) under the English auction with "going, going, gone" ending rule, the straightforward bidding strategy is dominant in the sense that it makes bidders avoid the risk of loss, and the bidding strategy leads to an efficient assignment, (2) under the sequential ascending auction, truth-telling is the most preferred bidding strategy to bidders, and it is an efficient allocation strategy, (3) from the respective of bidders, the Revenue Equivalence Theorem still holds in our models. Thus, this paper provides two efficient auction formats for carbon emission rights allocation.