Journal
JOURNAL OF POLITICAL ECONOMY
Volume 120, Issue 1, Pages 160-186Publisher
UNIV CHICAGO PRESS
DOI: 10.1086/665416
Keywords
-
Categories
Ask authors/readers for more resources
Price controls lead to misallocation of goods and encourage rent seeking. The misallocation effect alone ensures that a price control always reduces consumer surplus in an otherwise-competitive market with convex demand if supply is more elastic than demand or with log-convex demand (e. g., constant elasticity) even if supply is inelastic. The same results apply whether rationed goods are allocated by cost-less lottery or whether costly rent seeking and/or partial decontrol mitigates the inefficiency. Our analysis exploits the observation that in any market, consumer surplus equals the area between the demand curve and the industry marginal revenue curve.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available