Single Bid Restriction in Milk Quota Exchanges - Comparing the Danish and the Ontario Exchanges
Peter Max Friis Jensen,
Henrik Ballebye Olesen and
Rene H. Olsen
No 24181, Unit of Economics Working Papers from Royal Veterinary and Agricultural University, Food and Resource Economic Institute
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.
Keywords: Agribusiness (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:rvaewp:24181
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