ABSTRACT
This chapter analyzes the issue of market power in the context of markets for transferable property rights. It begins with the basic model for the case in which one firm can influence the market. A firm will be said to have market power if it realizes it has an influence on price. One avenue for research would be to extend the basic model to the case where two or more firms have market power. For the case of one firm with market power, the results have some intuitive appeal. If a firm with market power would elect to buy permits in a competitive market, then it follows a strategy resembling that of a monopsonist. The chapter considers a potential application of the basic model. A general list of references to potential applications in air and water pollution is provided in the study by Anderson et al.
