Firm behavior under quantity controls: The theory of virtual quantities

Dale Squires

Journal of Environmental Economics and Management, 2016, vol. 79, issue C, 70-86

Abstract: The theory of virtual quantities, the dual to virtual prices, provides a framework to analyze competitive multiproduct firm behavior under multiple quantity controls on inputs and outputs, including command-and-control quotas and transferable property rights. The framework addresses the firm׳s reactions to regulatory controls, impacts of adding or dropping quantity controls, inferring unrationed from rationed production, and conversion from command-and-control quotas to cap-and-trade systems with transferable property rights and secondary market behavior. The paper develops reasons for failure of quasi-concavity of technology, extends the elasticity of intensity׳s properties, and integrates the virtual price and virtual quantity frameworks. Virtual quantities are applied to assess potential firm responses to quantity controls and a potential transferable property right in a Malaysian fishery.

Keywords: Multiple inputs and outputs; Quotas; Rationing; Virtual quantities; Virtual prices; Cap-and-trade; Elasticity of intensity; Common resources; Malaysia (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:79:y:2016:i:c:p:70-86

DOI: 10.1016/j.jeem.2015.04.005

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