Individual transferable quotas in Cournot competition

Yasunori Okumura

Economic Modelling, 2016, vol. 55, issue C, 315-321

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.

Keywords: Individual transferable quota; Cournot competition; Taxation; Regulation (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:55:y:2016:i:c:p:315-321

DOI: 10.1016/j.econmod.2016.02.015

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