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The Case of the Vanishing Revenues: Auction Quotas with Monopoly

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  • Krishna, Kala

Abstract

This paper examines the effects of auctioning quota licenses when monopoly power exists. Here the sales of licenses will never raise any revenue if domestic and foreign markets are segmented. More surprisingly, the inability to raise revenue is shown to persist even when arbitrage across markets is possible as long as the quota is not too far from the free trade import level. This suggests that existing revenue estimates from auctioning quota licenses, which are based on the assumption of competition, are upwardly biased. It also makes it likely that quotas implemented by auctioning licenses, even when set optimally, have adverse welfare effects. Copyright 1990 by American Economic Association.

Suggested Citation

  • Krishna, Kala, 1990. "The Case of the Vanishing Revenues: Auction Quotas with Monopoly," American Economic Review, American Economic Association, vol. 80(4), pages 828-836, September.
  • Handle: RePEc:aea:aecrev:v:80:y:1990:i:4:p:828-36
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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.
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    Cited by:

    1. Krishna, Kala & Roy, Suddhasatwa & Thursby, Marie, 1998. "Implementing Market Access," Review of International Economics, Wiley Blackwell, vol. 6(4), pages 529-544, November.
      • Krishna, K & Thursby, M & Roy, S, 1996. "Implementing Market Access," Papers 96-011, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
      • Krishna, K & Roy, S & Thursby, M, 1996. "Implementaing Market Access," Papers 96-003, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
      • Kala Krishna & Suddhasatwa Roy & Marie Thursby, 1996. "Implementing Market Access," NBER Working Papers 5593, National Bureau of Economic Research, Inc.
    2. Liliana Winkelmann & Rainer Winkelmann, 1997. "The costs of non-tariff barriers to trade: Evidence from New Zealand," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(2), pages 270-281, June.
    3. Feestra, R.C. & Lewis, T.R. & Mcmillan, J., 1989. "Designing Policies To Open Trade," Papers 349, California Davis - Institute of Governmental Affairs.
    4. James Lake & Maia Linask, 2015. "Costly distribution and the non-equivalence of tariffs and quotas," Public Choice, Springer, vol. 165(3), pages 211-238, December.
    5. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Tariffs, quotas and terms-of-trade: The case of New Zealand," Journal of International Economics, Elsevier, vol. 46(2), pages 313-332, December.
    6. Cunha, Luis Campos e & Santos, Vasco, 1996. "Sleeping quotas, pre-emptive quota bidding and monopoly power," Journal of International Economics, Elsevier, vol. 40(1-2), pages 127-148, February.
    7. 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.
    8. Skully, David W., 1999. "The Economics Of Trq Administration," Working Papers 14584, International Agricultural Trade Research Consortium.
    9. Spencer, Barbara J., 1997. "Quota licenses for imported capital equipment: Could bureaucrats ever do better than the market?," Journal of International Economics, Elsevier, vol. 43(1-2), pages 1-27, August.
    10. Bannister, Geoffrey J., 1993. "Rent-sharing in the multi-fibre arrangement : the case of Mexico," Policy Research Working Paper Series 1191, The World Bank.
    11. Geoffrey Bannister, 1994. "Rent sharing in the multi-fibre arrangement: The case of Mexico," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(4), pages 800-827, December.

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