Efficiency Loss Due to Distortions in Dutch Milk Quota Trade
This study analyses the welfare costs of trade distortions in the exchange of milk quota by simulating potential quota trade for 1992/93 subject to various trade restrictions. Efficient quota allocation, in an unrestricted market, comes about when the price of quota is 0.39 guilders per kilogram in 1992/93 prices. A combination of a floor of 10 thousand kilograms on quota supply and a ceiling of 75 thousand kilograms on quota demand results in an efficiency loss of 2.29 per cent of total profit without trade distortions. Incorporating a margin of 2 per cent between the demand and supply price has a minor effect, the total efficiency loss being 0.13 per cent. Another 0.13 per cent accrues to intermediates in quota trade as transfer costs. Copyright 1997 by Oxford University Press.
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Volume (Year): 24 (1997)
Issue (Month): 1 ()
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