Single Bid Restriction in Milk Quota Exchanges - Comparing the Danish and the Ontario Exchanges Report as inadecuate




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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: quota exchange ; single bid ; multi-unit ; double auctions ; efficient trade.

Subject(s): Agribusiness

Issue Date: 2002

Publication Type: Working or Discussion Paper

PURL Identifier: http://purl.umn.edu/24181

Total Pages: 23

Series Statement: Unit of Economics Working Paper 2002/2

Record appears in: Royal Veterinary and Agricultural University > Food and Resource Economic Institute > Unit of Economics Working Papers





Author: Bogetoft, Peter ; Jensen, Peter Max Friis ; Nielsen, Kurt ; Olesen, Henrik Ballebye ; Olsen, Rene H.

Source: http://ageconsearch.umn.edu/record/24181?ln=en







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