The selection effect of quota rationing mechanisms on sales distribution: The convergence of auction and lottery

Rationing mechanisms are widely used to allocate scarce resources caused by policy intervention. The effect of rationing on equilibrium usually depends on the rationing mechanism. However, stylized facts in the Chinese passenger vehicle market suggest that the quota on license plates shifts vehicle...

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Bibliographic Details
Published inJournal of economic behavior & organization Vol. 200; pp. 803 - 819
Main Authors Hu, Mantian, Xiao, Junji, Zheng, Bingyong
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.08.2022
Subjects
Auction
Lottery
Rationing mechanisms
Selection effects
Selection effects
Rationing mechanisms
Lottery
Auction
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Summary:Rationing mechanisms are widely used to allocate scarce resources caused by policy intervention. The effect of rationing on equilibrium usually depends on the rationing mechanism. However, stylized facts in the Chinese passenger vehicle market suggest that the quota on license plates shifts vehicle demand to the high-price end, regardless of whether rationing occurs through an auction or a lottery. This study provides a unified theoretical explanation and an empirical analysis for this finding. When the quota allocation process incurs opportunity costs, only the consumers with a high willingness-to-pay participate in the process, which shifts sales distribution to the high-price end.
ISSN:0167-2681
1879-1751
DOI:10.1016/j.jebo.2022.06.020