Single Bid Restriction in Milk Quota Exchanges - Comparing the Danish and the Ontario Exchanges
AbstractThis 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 InfoPaper provided by Royal Veterinary and Agricultural University, Food and Resource Economic Institute in its series Unit of Economics Working papers with number 24181.
Date of creation: 2002
Date of revision:
quota exchange; single bid; multi-unit; double auctions; efficient trade.; Agribusiness;
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