TITLE:
Consumer Tax Production Quota Buyouts and Negative Compensation: Producers’ Dilemma
AUTHORS:
Andrew Schmitz, Dwayne J. Haynes, Troy G. Schmitz
KEYWORDS:
Consumer Tax Production Quota Buyout; Negative Compensation; Tobacco
JOURNAL NAME:
Theoretical Economics Letters,
Vol.3 No.3,
June
7,
2013
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”.