Strategic trade in pollution permits

Alex Dickson, Ian A. MacKenzie

Research output: Contribution to journalArticlepeer-review

96 Citations (Scopus)
25 Downloads (Pure)


Markets for pollution have become a popular regulatory instrument. In this article we investigate the implications of strategic trade in pollution permits. The permit market is developed as a strategic market game, where all firms are allowed to behave strategically and their roles as buyers or sellers of permits are determined endogenously with price-mediated trade. In a second stage, firms transact on a product market and we allow for a variety of market structures. We identify a unique equilibrium in permit exchange, investigate the properties of this equilibrium, and consider the effect of strategic behavior in the product market.
Original languageEnglish
Pages (from-to)94-113
Number of pages20
JournalJournal of Environmental Economics and Management
Early online date27 May 2017
Publication statusPublished - 31 Jan 2018


  • pollution market
  • market power
  • strategic market game


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