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Quota Brokers

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Abstract

This paper examines the role of middlemen (brokers) in an imperfect secondary market for quota licenses. Middlemen facilitate trade when markets are thin, as potential buyers and sellers find it difficult to meet and transact directly. However, in thin markets, middlemen also have the ability to influence the terms on which trades occur, and the wedge they create between the buying and selling price limits the extent to which they facilitate trade. We develop and simulate a model of quota broker behavior to examine their welfare implications.

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  • International Monetary Fund, 2004. "Quota Brokers," IMF Working Papers 04/179, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:04/179
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    1. George Hall and John Rust, Yale University, 2001. "Econometric Methods for Endogenously Sampled Time Series: The Case of Commodity Price Speculation in the Steel Market," Computing in Economics and Finance 2001 274, Society for Computational Economics.
    2. Daniel F. Spulber, 1996. "Market Making by Price-Setting Firms," Review of Economic Studies, Oxford University Press, vol. 63(4), pages 559-580.
    3. Krishna, Kala & Tan, Ling Hui, 1996. "The dynamic behavior of quota license prices," Journal of Development Economics, Elsevier, vol. 48(2), pages 301-321, March.
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