A Classroom Experiment about Tradable Permits
This article describes an experimental market designed for undergraduate classes in agricultural economics, environmental economics, public finance, or rural development. The experiment is a series of double-oral auctions that demonstrate private and social costs, externalities and market failures, and the efficiency of tradable permits relative to Pigouvian taxes. The novel feature is the non-pecuniary way that the negative production externality is mimicked in the classroom experiment. Details, instructions, and suggestions for how to tailor the experiment for different classes or purposes are included.
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Document Type: Research Article
Affiliations: Department of Economics, Iowa State University
Publication date: September 1, 2000