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Single Bid Restriction in Milk Quota Exchanges - Comparing the Danish and the Ontario Exchanges

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  • Bogetoft, Peter
  • Jensen, Peter Max Friis
  • Nielsen, Kurt
  • Olesen, Henrik Ballebye
  • Olsen, Rene H.

Abstract

This paper analyzes the design of the Danish milk quota exchange. We focus on the restriction that each producer can only submit a single bid (a quantity and a price limit). We argue that this restriction creates inefficiencies for two reasons. First, a single bid cannot express a buyer's downward sloping demand curve (the aggregation effect). Second, the buyers minimize the risk of foregoing profitable trade by submitting their average valuation rather than their marginal valuation of quota (the uncertainty effect). We use data from the (multiple bids) Ontario milk quota exchange, to evaluate the empirical impact of a single bid restriction.

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Bibliographic Info

Paper provided by Royal Veterinary and Agricultural University, Food and Resource Economic Institute in its series Unit of Economics Working papers with number 24181.

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Date of creation: 2002
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Handle: RePEc:ags:rvaewp:24181

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Web page: http://www.foi.life.ku.dk/
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Related research

Keywords: quota exchange; single bid; multi-unit; double auctions; efficient trade.; Agribusiness;

References

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  1. Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Microeconomics 9903002, EconWPA.
  2. Ann C. Ewasechko & Theodore M. Horbulyk, 1995. "Interprovincial Reallocation of Market Sharing Quota for Industrial Milk," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 43(2), pages 191-202, 07.
  3. Rucker, Randal R & Thurman, Walter N & Sumner, Daniel A, 1995. "Restricting the Market for Quota: An Analysis of Tobacco Production Rights with Corroboration from Congressional Testimony," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 142-75, February.
  4. Boots, Maroeska & Oude Lansink, Alfons & Peerlings, Jack, 1997. "Efficiency Loss Due to Distortions in Dutch Milk Quota Trade," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 24(1), pages 31-46.
  5. Nautz, D., 1995. "Optimal bidding in multi-unit auctions with many bidders," Economics Letters, Elsevier, vol. 48(3-4), pages 301-306, June.
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Cited by:
  1. Maurice Doyon & Lota Dabio Tamini & Virginie Simard & Kent Messer & Harry M. Kaiser, 2006. "L’économie expérimentale pour l’analyse de modifications au système centralisé de vente du quota laitier au Québec," CIRANO Working Papers 2006s-23, CIRANO.

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