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Optimal Two-Part Pricing in a Carbon Offset Market: A Comparison of Organizational Types

Murray Fulton and James Vercammen
Southern Economic Journal
Vol. 76, No. 2 (Oct., 2009), pp. 513-532
Stable URL: http://www.jstor.org/stable/27751480
Page Count: 20
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Optimal Two-Part Pricing in a Carbon Offset Market: A Comparison of Organizational Types
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Abstract

This article examines the optimal two-part pricing by an intermediary in a carbon offset market. In addition to creating a framework for analyzing carbon offset pricing, this article makes two contributions to the theoretical literature. First, we provide an in-depth examination of the roles played by the upstream inframarginal supply and participation elasticities and the downstream demand elasticity in determining the optimal two-part pricing strategy. Second, we compare the pricing decisions of three different organizational types: a for-profit firm, a public agency, and a producer association. The producer association problem, which has received little attention in the literature, yields counterintuitive results because a producer association must simultaneously reduce output and distribute all profits back to its members.

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