Market power and compliance with output quotas

Aaron Hatcher

    Research output: Working paper

    178 Downloads (Pure)

    Abstract

    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.
    Original languageEnglish
    Place of PublicationPortsmouth
    PublisherUniversity of Portsmouth
    Number of pages32
    Publication statusPublished - 2010

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