Tariffying Auctions

Posted: 2 Dec 1998

See all articles by R. Preston McAfee

R. Preston McAfee

California Institute of Technology - Division of the Humanities and Social Sciences; Yahoo! - Yahoo! Research Labs

Wendy Takacs

University of Maryland, Baltimore County (UMBC) - Department of Economics

Daniel R. Vincent

University of Maryland - Department of Economics

Abstract

A strategy to convert quotas to tariffs is to auction the quota rights and use the realized auction prices as guides to setting tariffs. In the 1980s, New Zealand employed auctions to allocate quota licenses. We analyze the relationship between tariff equivalents and auction prices for auctions with resale. Using panel data from New Zealand's quota license auctions, we estimate the expected value of the tariff equivalent. We exploit data from the secondary market prices to test the model's predictions. The predictions fail, suggesting either that auction prices may understate or that aftermarket prices overstate the true tariff equivalent.

JEL Classification: D44

Suggested Citation

McAfee, Randolph Preston and McAfee, Randolph Preston and Takacs, Wendy E. and Vincent, Daniel R., Tariffying Auctions. Available at SSRN: https://ssrn.com/abstract=138978

Randolph Preston McAfee

California Institute of Technology - Division of the Humanities and Social Sciences ( email )

1200 East California Blvd.
Pasadena, CA 91125
United States

Yahoo! - Yahoo! Research Labs ( email )

Sunnyvale, CA 94089
United States

Wendy E. Takacs

University of Maryland, Baltimore County (UMBC) - Department of Economics ( email )

1000 Hilltop Circle
Baltimore, MD 21250
United States

Daniel R. Vincent (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3485 (Phone)
301-405-3542 (Fax)

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