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Paper info: MECHANISM DESIGN AS A RESPONSE TO THE PROBLEM OF CLIMATE CHANGE

Title


MECHANISM DESIGN AS A RESPONSE TO THE PROBLEM OF CLIMATE CHANGE

Authors


Gareth Veal and
Stefanos Mouzas
Lancaster University
United Kingdom
Stefanos Mouzas

Place of Publication


The paper was published at the 24th IMP-conference in Uppsala, Sweden in 2008.

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Abstract


This paper explores the applicability of the theory of 'mechanism design' to the analysis of business interaction. We present a case study involving a large multinational energy company faced with the opportunity to respond proactively to the inclusion of the aviation industry within the European Emissions Trading Scheme as of 2012. Based on empirical findings, we demonstrate that mechanism design theory is a good set of conceptual tools for the design of economically sound mechanisms, aligning individual incentives with collective goals. Mechanism design theory, however, tends to advocate the design of optimal ways for 'application' of mechanisms, assuming a fairly passive set of organisations. The empirical evidence suggests that actors will not optimise responses to the rules of the game as isolated decisions. Instead, companies will respond to mechanisms as viewed within their wider business network which demonstrates socially embedded clues for coordination that impact on the design of the rules of game.