The dynamic behavior of quota license prices

Kala Krishna; Ling Hui Tan

doi:10.1016/0304-3878(95)00038-0

The dynamic behavior of quota license prices

Kala Krishna, Ling Hui Tan

Economics

Research output: Contribution to journal › Article › peer-review

4 Scopus citations

Abstract

In a static perfectly competitive model, it is well understood that a quota license has a scarcity value. In a dynamic setting with uncertainty, the license price has two additional components, both of which arise from the fact that the license is valid for an entire year. They are the asset market component and the option value component. In this paper, we construct a model of the quota license market in which the license demand and supply functions incorporate these various components, and estimate it using monthly data on apparel quota licenses from Hong Kong.

Original language	English (US)
Pages (from-to)	301-321
Number of pages	21
Journal	Journal of Development Economics
Volume	48
Issue number	2
DOIs	https://doi.org/10.1016/0304-3878(95)00038-0
State	Published - Jan 1 1996

All Science Journal Classification (ASJC) codes

Development
Economics and Econometrics

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10.1016/0304-3878(95)00038-0

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AB - In a static perfectly competitive model, it is well understood that a quota license has a scarcity value. In a dynamic setting with uncertainty, the license price has two additional components, both of which arise from the fact that the license is valid for an entire year. They are the asset market component and the option value component. In this paper, we construct a model of the quota license market in which the license demand and supply functions incorporate these various components, and estimate it using monthly data on apparel quota licenses from Hong Kong.

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The dynamic behavior of quota license prices

Abstract

All Science Journal Classification (ASJC) codes

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