This paper examines the compliance behaviour of a dominant firm in an output quota market when the firm is able to exercise market power in both the quota and the output markets. Even in the absence of enforcement, under certain conditions the firm may comply or even over-comply with its quota. The only unambiguous requirement is that the firm’s initial quota endowment is strictly positive. Otherwise, the firm will always cheat. These results appear robust to compliance or non-compliance in the competitive fringe.
|Place of Publication||Portsmouth|
|Publisher||University of Portsmouth|
|Number of pages||32|
|Publication status||Published - 2010|