Quantity Controls, License Transferability, and the Level of Investment
AbstractThis paper models investment/entry decisions in a competitive industry that is subject to a quantity control on an input for production. The quantity control is implemented by auctioning licenses for the restricted input. The paper shows that liberalizing the quantity control could reduce investment in the industry under certain circumstances. Furthermore, the level of investment is quite different when licenses are tradable than when they are not. Key factors in the comparison include the elasticity of demand for the final good and the degree of input substitutability. Two examples are computed to illustrate the results.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8796.
Date of creation: Feb 2002
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Other versions of this item:
- Krishna Kala M & Tan Ling Hui & Ranjan Ram, 2004. "Quantity Controls, License Transferability, and the Level of Investment," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-29, July.
- Ling Hui Tan & Kala Krishna & Ram Ranjan, 2001. "Quality Controls, License Transferability and the Level of Investment," IMF Working Papers 01/206, International Monetary Fund.
- F3 - International Economics - - International Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-03-14 (All new papers)
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NBER Working Papers
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