Volume Quotas with Heterogeneous Product Categories*

Volume quotas on imports are an important part of assistance packages afforded a number of major industries in Australia. Generally, quota is allocated to importers free of charge, although recently a proportion of quota for some product groups has been sold by tender. In this paper we compare the effects of volume quotas applied to heterogeneous product groups when allocated free of charge, by full tender sale and by a combination offender sale and free allocation. The analysis is undertaken for both competitive markets and in the case where importers have some market power.