Thin and lumpy: an experimental investigation of water quality trading
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Water quality trading schemes in the United States can predominantly be characterized by low trading volumes. In this paper we utilize laboratory economics experiments
to explore the extent to which the technology through which pollution abatement is achieved influences market outcomes. Mirroring the majority of water quality trading markets, the sessions utilize small trading groups composed of six participants. To understand the extent to which abatement technology influences trading behavior, the
experimental treatments vary the degree of heterogeneity in initial abatement costs and
the potential for long-lived investments in cost-reducing abatement technology.