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The Case of the Vanishing Revenues: Auction Quotas with Monopoly

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Kala Krishna

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Abstract

This paper examines the effects of auctioning quota licenses when monopoly power exists. With a foreign monopoly and domestic competition the sales of licenses will raise any revenue if domestic and foreign markets are segmented. More surprisingly, the inability to raise revenue is shown to persist even when partial or perfect arbitrage across markets is possible, as long as the quota is not too far from the free trade import level. In contrast, when there is a home monopoly and foreign competition, the price of a quota license can be positive so that selling licenses can dominate giving them away. However, because of the absence of any profit shifting, welfare falls even when licenses do indeed raise revenue.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2840.

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Date of creation: Feb 1991
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Handle: RePEc:nbr:nberwo:2840

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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. 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)
  2. 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!]
  3. Skully, David W., 1999. "The Economics Of Trq Administration," Working Papers 14584, International Agricultural Trade Research Consortium. [Downloadable!]
  4. 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:
  5. 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!]
  6. 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:
  7. Kala Krishna & Suddhasatwa Roy & Marie Thursby, 1996. "Implementing Market Access," NBER Working Papers 5593, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. 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)
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