This paper presents the results of an experimental investigation on incentives to adopt advanced abatement technology under emissions trading. Our experimental design mimics an industry with small asymmetric polluting firms regulated by different schemes of tradable permits. We consider three allocation/auction policies: auctioning off (costly) permits through an ascending clock auction, grandfathering permits with re-allocation through a single-unit double auction, and finally grandfathering with re-allocation through an ascending clock auction. We find that the treatments with an initial free allocation of permits (grandfathering) perform closer to the first best investment pattern than the treatment with pure auctioning. This result is mainly driven by higher efficiency in permit allocation in the treatments with grandfathering.JEL Classification: C92; D44; L51; Q28; Q55
We use a laboratory version of the intergenerational goods game (IGG) to investigate whether peer punishment facilitates the successful provision of multigenerational public goods. In our experiment, groups (generations) decide sequentially about the provision of a multigenerational public good through the voluntary contributions of their members. Successful provision requires that contributions meet a threshold and exclusively benefits members of future generations. Provision costs are borne only by the current generation. We compare a baseline condition without a punishment institution to a treatment condition where peer punishment can be inflicted exclusively on members of the same generation but not on members of past or future generations. We find that without punishment the likelihood of reaching the contribution threshold is low and that making punishment available within a generation is partially successful in sustaining cooperation in a succession of multiple generations.
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