Quote:
Originally Posted by Mickey76
He simply means the price of the product (milk,poultry etc.) is based on the cost of production plus a profit factor. The price of quota is not factored in at all. If for example the price of quota doubled tomorrow because 18 Hutterite colonies decided to try and buy more at the same time the price paid to the farmer for the milk or poultry wouldn’t change.
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Yes but the price that people are willing to pay for quota is the NPV of the cash flow that will be generated by the quota discounted by an acceptable return on investment.
The cash flow is dictated by the predicted future cost of production and regulated selling price.
Therefore if the price of quota is marginally greater than zero then prices are too high.