EFFICIENCY LOSS DUE TO DISTORTIONS IN DUTCH MILK QUOTA TRADE

This study analyses the welfare costs of trade distortions in the exch ange of milk quota by simulating potential quota trade for 1992/93 sub ject to various trade restrictions. Efficient quota allocation, in an unrestricted market, comes about when the price of quota is 0.39 guild ers pel kilogram in 1992/93 prices. A combination of a floor of 10 tho usand kilograms on quota supply and a ceiling of 75 thousand kilograms on quota demand results in an efficiency loss of 2.29 per cent of tot al profit without trade distortions. Incorporating a margin of 2 per c ent between the demand and supply price has a minor effect, the total efficiency loss being 0.13 per cent. Another 0.13 per cent accrues to intermediates in quota trade as transfer costs.