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

Mantian HU, Junji XIAO*, Bingyong ZHENG

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review

Abstract

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.
Original languageEnglish
Pages (from-to)803-819
Number of pages17
JournalJournal of Economic Behavior and Organization
Volume200
DOIs
Publication statusPublished - 1 Aug 2022

Bibliographical note

Publisher Copyright:
© 2022

Keywords

  • Rationing mechanisms
  • Lottery
  • Auction
  • Selection effects

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