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Welfare Trade-offs between Transferable and Non-Transferable Lotteries

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  • Ohler, Adrienne
  • Chouinard, Hayley H.
  • Yoder, Jonathan K.

Abstract

The Four Rivers lottery run by the National Forest Service distributes the opportunity to raft four sections of rivers in Idaho through a non-transferable lottery. The restriction of trade and focus on equity in distribution creates a deadweight loss in total surplus compared with a market or auction system. If the NFS allowed the transferring of permits, then there exists a potential for rafters to gain surplus in trade. However, non-rafters have an incentive to enter the transferable lottery to make a profit from trade. Using the NFS lottery as a guide, this paper examines welfare under the two lottery system to understand how changes in transferability affect the welfare of users and non-users, and the revenues of the government. Since variables, such as number of permits, permit fees, and application fees, also impact welfare, we derive comparative statics for these variables to demonstrate how these government controls affect rafter welfare, non-rafter welfare, and government revenue differently under transferable and non-transferable lotteries. Our results show the welfare trade-offs rafters have between transferable and non-transferable lotteries.

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Bibliographic Info

Paper provided by Western Agricultural Economics Association in its series 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon with number 7363.

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Date of creation: 2007
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Handle: RePEc:ags:waeapo:7363

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Keywords: Resource /Energy Economics and Policy;

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  1. Nickerson, Jack A. & Vanden Bergh, Richard, 1999. "Economizing in a context of strategizing: governance mode choice in Cournot competition," Journal of Economic Behavior & Organization, Elsevier, vol. 40(1), pages 1-15, September.
  2. Boyce, John R, 1994. "Allocation of Goods by Lottery," Economic Inquiry, Western Economic Association International, vol. 32(3), pages 457-76, July.
  3. Scrogin, David & Berrens, Robert P. & Bohara, Alok K., 2000. "Policy Changes And The Demand For Lottery-Rationed Big Game Hunting Licenses," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(02), December.
  4. Creel, Michael D. & Loomis, John B., 1992. "Modeling hunting demand in the presence of a bag limit, with tests of alternative specifications," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 99-113, March.
  5. Jensen, Jesper & Rasmussen, Tobias N., 2000. "Allocation of CO2 Emissions Permits: A General Equilibrium Analysis of Policy Instruments," Journal of Environmental Economics and Management, Elsevier, vol. 40(2), pages 111-136, September.
  6. J¸rgen Eichberger & Werner G¸th & Wieland M¸ller, 2003. "Attitudes Towards Risk: An Experiment," Metroeconomica, Wiley Blackwell, vol. 54(1), pages 89-124, 02.
  7. Scrogin, David, 2005. "Lottery-rationed public access under alternative tariff arrangements: changes in quality, quantity, and expected utility," Journal of Environmental Economics and Management, Elsevier, vol. 50(1), pages 189-211, July.
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