Consumer Tax Production Quota Buyouts and Negative Compensation: Producers’ Dilemma

Andrew Schmitz; Dwayne J. Haynes; Troy G. Schmitz

doi:10.4236/tel.2013.33025

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Theoretical Economics Letters > Vol.3 No.3, June 2013

Consumer Tax Production Quota Buyouts and Negative Compensation: Producers’ Dilemma ()

Andrew Schmitz, Dwayne J. Haynes, Troy G. Schmitz

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Food and Resource Economics, Institute of Food and Agricultural Sciences, University of Florida, Gainesville, USA.

DOI: 10.4236/tel.2013.33025 PDF HTML XML 3,427 Downloads 5,065 Views Citations

Abstract

In some cases, production quota buyouts can be paid for through consumer taxes. Using a simplified two-period model, we show that producers can never gain from a consumer tax buyout even if the compensation is based on an inflated quota value. The higher the quota value used as the basis of compensation, the greater is the overall producer loss from the buyout. This producer loss within a two-period model buyout is called “negative producer compensation”.

Keywords

Consumer Tax Production Quota Buyout; Negative Compensation; Tobacco

Share and Cite:

A. Schmitz, D. Haynes and T. Schmitz, "Consumer Tax Production Quota Buyouts and Negative Compensation: Producers’ Dilemma," Theoretical Economics Letters, Vol. 3 No. 3, 2013, pp. 156-158. doi: 10.4236/tel.2013.33025.

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	A. Schmitz and T. G. Schmitz, “Benefit-Cost Analysis: Distributional Considerations under Producer Quota Buyouts,” Journal of Benefit-Cost Analysis, Vol. 1, No. 2, 2010, Article 2. http://www.bepress.com/jbca/vol1/iss1/2
[2]	T. G. Schmitz and A. Schmitz, “Compensation and the Twin Producer Gains from Production Quotas,” Theoretical Economic Letters, Vol. 1, No. 3, 2011, pp. 70-72. doi:10.4236/tel.2011.13015
[3]	R. Just, D. Hueth and A. Schmitz, “Applied Welfare Economics and Public Policy,” 2nd Edition, Prentice-Hall Publishers, Englewood Cliffs, 2004.
[4]	T. G. Schmitz, A. Schmitz and D. Haynes, “Inflated Production Quota Gains Paid for by a Consumption Tax,” Theoretical Economic Letters, Vol. 2, No. 1, 2012, pp. 67-68. doi:10.4236/tel.2012.21012