Single Bid Restriction in Milk Quota Exchanges - Comparing the Danish and the Ontario Exchanges
This paper analyzes the design of the Danish milk quota exchange. We focus on the restriction that each producer can only submit a single bid (a quantity and a price limit). We argue that this restriction creates inefficiencies for two reasons. First, a single bid cannot express a buyer's downward sloping demand curve (the aggregation effect). Second, the buyers minimize the risk of foregoing profitable trade by submitting their average valuation rather than their marginal valuation of quota (the uncertainty effect). We use data from the (multiple bids) Ontario milk quota exchange, to evaluate the empirical impact of a single bid restriction.
|Date of creation:||2002|
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- Boots, Maroeska & Oude Lansink, Alfons & Peerlings, Jack, 1997. "Efficiency Loss Due to Distortions in Dutch Milk Quota Trade," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 24(1), pages 31-46.
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- Nautz, D., 1995. "Optimal bidding in multi-unit auctions with many bidders," Economics Letters, Elsevier, vol. 48(3-4), pages 301-306, June.
- Ann C. Ewasechko & Theodore M. Horbulyk, 1995. "Interprovincial Reallocation of Market Sharing Quota for Industrial Milk," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 43(2), pages 191-202, 07.
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