TY  - JOUR
AU  - Krishna,Kala
AU  - Tan,Ling Hui
AU  - Ranjan,Ram
TI  - Quantity Controls, License Transferability, and the Level of Investment
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8796
PY  - 2002
Y2  - February 2002
UR  - http://www.nber.org/papers/w8796
L1  - http://www.nber.org/papers/w8796.pdf
N1  - Author contact info:
Kala Krishna
Department of Economics
523 Kern Graduate Building
The Pennsylvania State University
University Park, PA 16802
Tel: 814/865-1106
Fax: 814/863-4775
E-Mail: kmk4@psu.edu

Ram Ranjan
E-Mail: rxr229@psu.edu
AB  - This paper models investment/entry decisions in a competitive industry that is subject to a quantity control on an input for production. The quantity control is implemented by auctioning licenses for the restricted input. The paper shows that liberalizing the quantity control could reduce investment in the industry under certain circumstances. Furthermore, the  level of investment is quite different when licenses are tradable than when they are not. Key factors in the comparison include the elasticity of demand for the final good and the degree of input substitutability. Two examples are computed to illustrate the results.
ER  -