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Auctioning Payment Entitlements

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Author Info
Nielsen, Kurt

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Abstract

Payment entitlements is a new commodity that arises from the new European common agricultural policy. The agricultural subsidies are decoupled from the actual production and replaced by the so-called payment entitlements. A payment entitlement has a farm specific value and may be freely traded. This paper discusses the complexity of this new market and suggests an auction that simplifies the complexity. The suggested auction allows a buyer to simultaneously bid on all payment entitlements. The prices are found by a tatonnement that monotonically approximates the equilibrium prices for the different types of payment entitlements for sale. The auction enhances the competition and efficiency of the market, which is essential for the individual members of the European Union in order for them to receive their entitled subsidies.

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Publisher Info
Paper provided by European Association of Agricultural Economists in its series 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark with number 24566.

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Date of creation: 2005
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Handle: RePEc:ags:eaae05:24566

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Related research
Keywords: auction; multiple goods; bidding agents; tatonnement; agricultural subsidies; Agricultural Finance; D44; Q13;

References listed on IDEAS
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  1. Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
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  2. Yoon, Kiho, 2001. "The Modified Vickrey Double Auction," Journal of Economic Theory, Elsevier, vol. 101(2), pages 572-584, December. [Downloadable!] (restricted)
  3. McAfee, R. Preston, 1992. "A dominant strategy double auction," Journal of Economic Theory, Elsevier, vol. 56(2), pages 434-450, April. [Downloadable!] (restricted)
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  4. Myerson, Roger B. & Satterthwaite, Mark A., 1983. "Efficient mechanisms for bilateral trading," Journal of Economic Theory, Elsevier, vol. 29(2), pages 265-281, April. [Downloadable!] (restricted)
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  5. Michael B. Gordy, 1999. "Hedging Winner'S Curse With Multiple Bids: Evidence From The Portuguese Treasury Bill Auction," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 448-465, August. [Downloadable!] (restricted)
  6. Friedman, Daniel & Ostroy, Joseph, 1995. "Competitivity in Auction Markets: An Experimental and Theoretical Investigation," Economic Journal, Royal Economic Society, vol. 105(428), pages 22-53, January. [Downloadable!] (restricted)
  7. Satterthwaite, Mark A & Williams, Steven R, 1989. "The Rate of Convergence to Efficiency in the Buyer's Bid Double Auction as the Market Becomes Large," Review of Economic Studies, Blackwell Publishing, vol. 56(4), pages 477-98, October. [Downloadable!] (restricted)
  8. Nautz, D., 1995. "Optimal bidding in multi-unit auctions with many bidders," Economics Letters, Elsevier, vol. 48(3-4), pages 301-306, June. [Downloadable!] (restricted)
  9. Cheng, John Q & Wellman, Michael P, 1998. "The WALRAS Algorithm: A Convergent Distributed Implementation of General Equilibrium Outcomes," Computational Economics, Springer, vol. 12(1), pages 1-24, August. [Downloadable!]
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  10. Amir, Rabah & Sahi, Siddharta & Shubik, Martin & Yao, Shuntian, 1990. "A strategic market game with complete markets," Journal of Economic Theory, Elsevier, vol. 51(1), pages 126-143, June. [Downloadable!] (restricted)
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  11. Wilson, Robert B, 1985. "Incentive Efficiency of Double Auctions," Econometrica, Econometric Society, vol. 53(5), pages 1101-15, September. [Downloadable!] (restricted)
  12. Shih-Fen Cheng & Evan Leung & Kevin M. Lochner & Kevin O'Malley & Daniel M. Reeves & L. Julian Schvartzman & Michael P. Wellman, 2003. "Walverine: A Walrasian Trading Agent," Computational Economics 0302003, EconWPA. [Downloadable!]
  13. Peter Cramton, 2003. "Electricity Market Design: The Good, the Bad, and the Ugly," Papers of Peter Cramton 02emd, University of Maryland, Department of Economics - Peter Cramton, revised 07 Dec 2002. [Downloadable!]
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