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Published July 13, 2017 | Submitted
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ACE: A Combinatorial Market Mechanism


In 1990 the South Coast Air Quality Management District created a tradable emissions program to more efficiently manage the ex- tremely bad emissions in the Los Angeles basin. The program created 136 different assets that an environmental engineer could use to cover emissions in place of installing expensive abatement equipment. Standard markets could not deal with this complexity and little trading occurred. A new combinatorial market was created in response and operated successfully for many years. That market design, called ACE (approximate competitive equilibrium), is described in detail and its successful performance in practice is analyzed.

Additional Information

To appear in Handbook of Spectrum Auction Design, Cambridge University Press. John Ledyard would like to thank NSF for its support under grants numbered 1216024-ICES: Large: Collaborative Research: Markets - Algorithms, Applications and the Digital Economy and 1518941-NeTS: Large: Networked Markets: Theory and Applications.

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August 18, 2023
January 13, 2024