Auction Experiments and Simulations of Milk Quota Exchanges

Bernhard Brümmer, Jens-Peter Loy and Till Requate ()

No 61304, 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association

Abstract: Since 2000 Germany has a fairly unique market mechanism to trade milk quotas between dairy farms. The two major features are: (1) a quasi auctioning system that produces excess demands which are covered by state reserves free of charge and (2) a price band is used to exclude high price bids. For both features an experimental design is developed to study their impact in comparison to a regular seller’s sealed bid double auction. Results show that both treatments lead to significant misallocations. These are due the direct impact of regulations and due to an imperfect adjustment of bidding functions towards them. The major goal of the market design to reduce quota prices is reached, however, at significant trade losses.

Keywords: Institutional and Behavioral Economics; Research Methods/ Statistical Methods (search for similar items in EconPapers)
Pages: 11
Date: 2010
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Working Paper: Auction Experiments and Simulations of Milk Quota Exchanges (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea10:61304

DOI: 10.22004/ag.econ.61304

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