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The Economics of Administering Import Quotas with Licenses-on-Demand in Agriculture

Author

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  • Jana Hranaiova
  • Harry de Gorter
  • James Falk

Abstract

A Nash equilibrium is determined for licenses-on-demand import quotas where licenses are allocated on a prorated basis. Inefficiency is incurred because licenses are allocated to high-cost firms. The ability to overbid exacerbates the inefficiency due to proportionate reductions in licenses. Quota expansion causes high-cost firms to decrease their bids but reduces inefficiency. The entry of a new firm causes all incumbent firms to increase bids or bid the quota. Not penalizing firms for the non-use of licenses increases inefficiency. The inefficiency impacts of tariff reductions, license fees, limits per firm, and imperfect information are also addressed. Copyright 2006, Oxford University Press.

Suggested Citation

  • Jana Hranaiova & Harry de Gorter & James Falk, 2006. "The Economics of Administering Import Quotas with Licenses-on-Demand in Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 338-350.
    • Handle: RePEc:oup:ajagec:v:88:y:2006:i:2:p:338-350
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2006.00862.x
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    Citations

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    Cited by:

    1. James Lake & Maia Linask, 2015. "Costly distribution and the non-equivalence of tariffs and quotas," Public Choice, Springer, vol. 165(3), pages 211-238, December.
    2. James Falk & Jana Hranaiova & Harry Gorter, 2006. "Constrained equilibrium in a bidding problem," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 14(3), pages 299-311, September.
    3. Ramos, Maria Priscila, 2007. "Politique Commerciale, Qualité et Environnement: une Application aux Négociations Commerciales entre l’Union Européenne et le Mercosur," MPRA Paper 12640, University Library of Munich, Germany.
    4. Abbassi, Abdessalem & Tamini, Lota D. & Dakhlaoui, Ahlem, 2015. "Import quota allocation between regions under Cournot competition," Economic Modelling, Elsevier, vol. 51(C), pages 484-490.

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