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Subsidy Incidence in Privately Negotiated Spot Markets: Experimental Evidence

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  • Rahman, Mohammad Maksudur
  • Bastian, Christopher T.
  • Jones Ritten, Chian
  • Phillips, Owen R.

Abstract

We use experimental methods to investigate subsidy incidence, the transfer of subsidy payments from intended recipients to other economic agents, in privately negotiated spot markets. Our results show that market outcomes in treatments with a subsidy given to either buyers or sellers are significantly different from both a no-subsidy treatment and the competitive prediction of a 50% subsidy incidence. The disparity in incidence across treatments relative to predicted levels suggests that incidence equivalence does not hold in this market setting. Moreover, we find no statistical difference in market outcomes when benefits are framed as a “subsidy†versus a schedule shift.

Suggested Citation

  • Rahman, Mohammad Maksudur & Bastian, Christopher T. & Jones Ritten, Chian & Phillips, Owen R., 2019. "Subsidy Incidence in Privately Negotiated Spot Markets: Experimental Evidence," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 51(2), pages 219-234, May.
    • Handle: RePEc:cup:jagaec:v:51:y:2019:i:02:p:219-234_00
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    Cited by:

    1. Chian Jones Ritten & Christopher Bastian & Owen Phillips, 2021. "The relative effectiveness of law enforcement policies aimed at reducing illegal trade: Evidence from laboratory markets," PLOS ONE, Public Library of Science, vol. 16(11), pages 1-20, November.
    2. Anthony Baffoe-Bonnie & Christopher T. Bastian & Dale J. Menkhaus & Owen R. Phillips, 2021. "Stacking Subsidies in Factor Markets: Evidence from Market Experiments," JRFM, MDPI, vol. 14(12), pages 1-26, December.

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