Equilibrium Analysis of a Quota-regulated Market

Existing micro economic studies of quota-regulated markets have emphasized the short-run effects of market disturbances. This paper considers the long-run market equilibrium impacts of changes in technology, in input prices and in the distribution of output price when risk averse firms may freely enter and exit the regulated industry. Some of the results are intuitive, while others are not. In general, signing long-run equilibrium results requires a less restrictive preference structure than does signing short-run results. However, the nature of the equilibrating mechanism, ignored in partial analysis, is found to be important.