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Mathematical Problems in Engineering
Volume 2014, Article ID 438104, 7 pages
http://dx.doi.org/10.1155/2014/438104
Research Article

A Pareto Optimal Auction Mechanism for Carbon Emission Rights

1School of International Trade and Economics, University of International Business and Economics, Beijing 100029, China
2School of Economics, Capital University of Economics and Business, Beijing 100070, China
3Department of Manufacturing Engineering & Engineering Management, City University of Hong Kong, Kowloon, Hong Kong
4Academy of Mathematics and Systems Science, Chinese Academy of Sciences, Beijing 100190, China

Received 23 December 2013; Accepted 24 February 2014; Published 30 March 2014

Academic Editor: Chuangxia Huang

Copyright © 2014 Mingxi Wang et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

The carbon emission rights do not fit well into the framework of existing multi-item auction mechanisms because of their own unique features. This paper proposes a new auction mechanism which converges to a unique Pareto optimal equilibrium in a finite number of periods. In the proposed auction mechanism, the assignment outcome is Pareto efficient and the carbon emission rights’ resources are efficiently used. For commercial application and theoretical completeness, both discrete and continuous markets—represented by discrete and continuous bid prices, respectively—are examined, and the results show the existence of a Pareto optimal equilibrium under the constraint of individual rationality. With no ties, the Pareto optimal equilibrium can be further proven to be unique.