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Individual transferable quotas in Cournot competition

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  • Okumura, Yasunori

Abstract

We focus on the individual transferable quota system. We theoretically consider a product market in which firms engage in Cournot competition, but firms cannot set their quantities exceeding the quotas that held and can trade their initial quotas in a market. First, we show that an inefficient outcome may be realized and moreover inefficient trades may occur; that is, a firm may sell quotas to a less efficient firm. Second, we compare three regulatory policies, individual transferable quotas, specific taxes, and individual non-transferable quotas. Finally, we consider the effect of quota share limits on the Cournot equilibrium; we show that tightening these limits never increases social welfare and may, rather, decrease it.

Suggested Citation

  • Okumura, Yasunori, 2016. "Individual transferable quotas in Cournot competition," Economic Modelling, Elsevier, vol. 55(C), pages 315-321.
  • Handle: RePEc:eee:ecmode:v:55:y:2016:i:c:p:315-321
    DOI: 10.1016/j.econmod.2016.02.015
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