Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/155046 
Year of Publication: 
1999
Series/Report no.: 
Nota di Lavoro No. 93.1999
Publisher: 
Fondazione Eni Enrico Mattei (FEEM), Milano
Abstract: 
It is typical for economists and policy makers alike to presume that competitive markets allocate input licenses efficiently. This paper demonstrates that competition in the licenses market cannot assure efficiency when the product market is oligopolistic. We develop a model to provide the conditions under which a bureaucratic mechanism is welfare superior to a marketable input licenses system. Price taking behaviour in the licenses market ensures transfer of licenses to the less efficient firm which becomes more aggressive in the product market. A higher than the welfare maximising number of licenses are traded. When the input and final output technologies are positively correlated, competitive license trading may result in lower output and welfare.
Subjects: 
Competitive trading of input quotas
oligopolistic product markets
economic efficiency
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.