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The Case of the Vanishing Revenues: Auction Quotas with Monopoly

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Author Info
Krishna, Kala

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Abstract

This paper examines the effects of auctioning quota licenses when monopoly power exists. Here the sales of licenses will never raise any revenue if domestic and foreign markets are segmented. More surprisingly, the inability to raise revenue is shown to persist even when arbitrage across markets is possible as long as the quota is not too far from the free trade import level. This suggests that existing revenue estimates from auctioning quota licenses, which are based on the assumption of competition, are upwardly biased. It also makes it likely that quotas implemented by auctioning licenses, even when set optimally, have adverse welfare effects. Copyright 1990 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 80 (1990)
Issue (Month): 4 (September)
Pages: 828-36
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Handle: RePEc:aea:aecrev:v:80:y:1990:i:4:p:828-36

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  1. Kala Krishna, 1988. "The Case of the Vanishing Revenues: Auction Quotas With Oligopoly," NBER Working Papers 2723, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bannister, Geoffrey J., 1993. "Rent-sharing in the multi-fibre arrangement : the case of Mexico," Policy Research Working Paper Series 1191, The World Bank. [Downloadable!]
  2. Robert C. Feenstra & Tracy R. Lewis & John McMillan, 1990. "Designing Policies to Open Trade," NBER Working Papers 3258, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Skully, David W., 1999. "The Economics Of Trq Administration," Working Papers 14584, International Agricultural Trade Research Consortium. [Downloadable!]
  4. Liliana Winkelmann & Rainer Winkelmann, 1997. "The costs of non-tariff barriers to trade: Evidence from New Zealand," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(2), pages 270-281, 06. [Downloadable!] (restricted)
  5. Kala Krishna & Suddhasatwa Roy & Marie Thursby, 1996. "Implementing Market Access," NBER Working Papers 5593, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Geoffrey Bannister, 1994. "Rent sharing in the multi-fibre arrangement: The case of Mexico," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(4), pages 800-827, December. [Downloadable!] (restricted)
  7. Barbara J. Spencer, 1996. "Quota Licenses for Imported Capital Equipment: Could Bureaucrats Ever DoBetter than the Market?," NBER Working Papers 5695, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Shumei Gao & Jihe Song, 2004. "Quota Use under VERs: A theoretical framework and some evidence on MFA quota use," Working Papers E03, Department of Economics, School of Management and Languages, Heriot Watt University. [Downloadable!]
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