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Designing a Transborder Trading Scheme
9 Indeed, the famous Coase Theorem states that the initial allocation
of property rights is irrelevant from an efficiency aspect
(Hanley, et al. 1997).
10 Grandfathering is exogenous in the sense that past action, which
cannot be altered by current behavior, is what determines the current
allocation.
11 This concern applies only if financial markets are imperfect or
incumbent firms enjoy market power.
12 The financial literature distinguishes between formal exchanges,
such as the New York Stock Exchange, and over-the-counter markets,
such as the NASDAQ. Almost certainly any emission credit
exchange that might be established would be over-the-counter.
13 Direct negotiations are often facilitated by a broker.
14 This is an example of a well-known phenomenon in game theory
know as time inconsistency.
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