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Tariffying Auctions

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  • R. Preston McAfee
  • Wendy Takacs
  • Daniel R. Vincent

Abstract

A strategy to convert quotas to tariffs is to auction the quota rights and use the realized auction prices as guides to setting tariffs. In the 1980s, New Zealand employed auctions to allocate quota licenses. We analyze the relationship between tariff-equivalents and auction prices for auctions with resale. Using panel data from New Zealand's quota license auctions, we estimate the expected value of the tariff equivalent. We exploit data from the secondary market prices to test the model's predictions. The predictions fail, suggesting either that auction prices may understate or that aftermarket prices overstate the true tariff equivalent.

Suggested Citation

  • R. Preston McAfee & Wendy Takacs & Daniel R. Vincent, 1999. "Tariffying Auctions," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 158-179, Spring.
    • Handle: RePEc:rje:randje:v:30:y:1999:i:spring:p:158-179
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    Cited by:

    1. Sen, Arijit & Swamy, Anand V., 2004. "Taxation by auction: fund raising by 19th century Indian guilds," Journal of Development Economics, Elsevier, vol. 74(2), pages 411-428, August.
    2. Marco Pagnozzi & Krista Jabs Saral, 2013. "Multi-Object Auctions with Resale: An Experimental Analysis," CSEF Working Papers 328, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. Sunnevåg, Kjell J., 2001. "Auction design for the allocation of multiple units of a homogenous good: Theoretical background and practical experience," University of California at Santa Barbara, Economics Working Paper Series qt6wh704p7, Department of Economics, UC Santa Barbara.
    4. Joerin, Robert, 2014. "Improving Market Access: The Role Of Auctions In Converting Tariff-Rate Quotas Into Single Tariffs," Review of Agricultural and Applied Economics (RAAE), Faculty of Economics and Management, Slovak Agricultural University in Nitra, vol. 17(1), March.
    5. Roberton Williams, 2002. "Prices vs. Quantities vs. Tradable Quantities," NBER Working Papers 9283, National Bureau of Economic Research, Inc.
    6. Susan Athey & Philip A. Haile, 2002. "Identification of Standard Auction Models," Econometrica, Econometric Society, vol. 70(6), pages 2107-2140, November.
    7. repec:ags:aoeisl:170467 is not listed on IDEAS

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