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”.
Cite this paper
A. Schmitz, D. Haynes and T. Schmitz, "Consumer Tax Production Quota Buyouts and Negative Compensation: Producers’ Dilemma," Theoretical Economics Letters
, Vol. 3 No. 3, 2013, pp. 156-158. doi: 10.4236/tel.2013.33025
 A. Schmitz and T. G. Schmitz, “Benefit-Cost Analysis: Distributional Considerations under Producer Quota Buyouts,” Journal of Benefit-Cost Analysis, Vol. 1, No. 2, 2010, Article 2. http://www.bepress.com/jbca/vol1/iss1/2
 T. G. Schmitz and A. Schmitz, “Compensation and the Twin Producer Gains from Production Quotas,” Theoretical Economic Letters, Vol. 1, No. 3, 2011, pp. 70-72.
 R. Just, D. Hueth and A. Schmitz, “Applied Welfare Economics and Public Policy,” 2nd Edition, Prentice-Hall Publishers, Englewood Cliffs, 2004.
 T. G. Schmitz, A. Schmitz and D. Haynes, “Inflated Production Quota Gains Paid for by a Consumption Tax,” Theoretical Economic Letters, Vol. 2, No. 1, 2012, pp. 67-68. doi:10.4236/tel.2012.21012