Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111398
Authors: 
Kersting, Stefan
Hüttel, Silke
Odening, Martin
Year of Publication: 
2015
Series/Report no.: 
Thünen-Series of Applied Economic Theory 140
Abstract: 
This paper analyses the impact of a tradable production quota on firm entry and exit in the agricultural industry. We develop a dynamic stochastic equilibrium framework considering that a release of production capacity by exiting firms affects the investment options for entrants. Firms' investment and exit decisions depend on future output and quota prices, which in turn will be affected by the evolution of industry structures themselves. Contrary to many static models we find that introducing a quota system may foster structural change. A tradable quota increases the liquidation value and makes inefficient firms cease production despite higher output prices.
Subjects: 
dynamic stochastic equilibrium
production quota
firm entry and exit
dairy sector
JEL: 
D41
L11
Q11
Document Type: 
Working Paper

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