Flexible quota constraints in positive mathematical programming models

To explain over- and underuse of available quota, Buysse et al. (2007) have integrated the shadow cost of the quota constraint in a quota flexibility function in a positive mathematical programming model. This method and central hypothesis, formulated and tested for the case of Belgian sugar beet farms, is in current paper extended and confirmed for the cases of Flemish dairy quota and manure emission rights. Despite the different organisation, objectives and implementations of the diverse quota systems, the results are similar. A higher utilisation of quota is significantly driven by the quota rent, but farm characteristics are also important and the effect declines with increasing quota rent. Regardless the quota, the dairy quota flexibility behaviour of the sample of Flemish farms results in an output price elasticity of 0.6%. The quota flexibility functions can be used for policy analysis, model sophistication and farm advisory instrument.