Essays on Environmental Economics and Industrial Orgnanization

Abstract

This dissertation comprises three essays on environmental economics and industrial organization. A common theme for the essays is that they draw motivation from the real world and the theory literature to study individual behavior in environment and energy problems. The first essay explores firm behavior in a new environment by examining private electric utilities' beliefs about sulfur dioxide allowance prices following the implementation of the U.S. Acid Rain Program in 1995. It questions the standard assumption in the empirical industrial organization literature that firms have reasonable expectations about future market conditions. This is partially motivated by strong qualitative evidence I have gathered from interviewing regulators, brokers, and electric utility executives that utilities were struggling to make sense of the allowance market, especially in the early years of this first large-scale cap-and-trade program. In the second essay, co-authored with Richard Zeckhauser, we emphasize that in reality, nations are in substantially asymmetric situations. We then leverage this under-appreciated fact to construct a mechanism that leads to voluntary and Pareto efficient contributions to global public goods from individual nations. In the third essay, I introduce repeated games with imperfect public monitoring from the theory literature to empirical industrial organization and explore partial identification of model primitives. This allows us to test firm conduct and detect collusion in contexts where firms do not observe each other's behavior perfectly, such as the operations of the Organization of the Petroleum Exporting Countries.