Regulated Prices, Rent Seeking, and Consumer Surplus.
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...
| Publicado en: | Journal of Political Economy Vol. 120; no. 1; pp. 160 - 187 |
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| Autores principales: | , |
| Formato: | Artículo |
| Publicado: |
University of Chicago Press
Feb2012
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| Acceso en línea: | Ver este registro en EBSCOhost |
| Sumario: | 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 costless 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. |
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