Price Controls and Consumer Surplus
AbstractThe condition for when a price control increases consumer welfare in perfect competition is tighter than often realised. When demand is linear, a small restriction on price only increases consumer surplus if the elasticity of demand exceeds the elasticity of supply; with log-linear or constant-elasticity, demand consumers are always hurt by price controls. The results are best understood - and can be related to monopoly-theory results - using the fact that consumer surplus equals the area between the demand curve and the industry marginal-revenue curve.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2009-W07.
Length: 11 pages
Date of creation: 01 Jul 2009
Date of revision:
Contact details of provider:
Web page: http://www.nuff.ox.ac.uk/economics/
Rationing; Allocative Efficiency; Microeconomic Theory; Marginal Revenue; Minimum Wage; Rent Control; Consumer Welfare;
Other versions of this item:
- D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- D6 - Microeconomics - - Welfare Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-12-11 (All new papers)
- NEP-COM-2009-12-11 (Industrial Competition)
- NEP-IND-2009-12-11 (Industrial Organization)
- NEP-MKT-2009-12-11 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Erzo F.P. Luttmer, 2007.
"Does the Minimum Wage Cause Inefficient Rationing?,"
NBER Working Papers
13012, National Bureau of Economic Research, Inc.
- Luttmer Erzo F.P., 2007. "Does the Minimum Wage Cause Inefficient Rationing?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-42, October.
- Luttmer, Erzo F. P., 2007. "Does the Minimum Wage Cause Inefficient Rationing?," Working Paper Series rwp07-018, Harvard University, John F. Kennedy School of Government.
- Luttmer, Erzo F.P., 2007. "Does the Minimum Wage Cause Inefficient Rationing?," IZA Discussion Papers 2713, Institute for the Study of Labor (IZA).
- Lucas W. Davis & Lutz Kilian, 2008.
"The Allocative Cost of Price Ceilings in the U.S. Residential Market for Natural Gas,"
NBER Working Papers
14030, National Bureau of Economic Research, Inc.
- Lucas W. Davis & Lutz Kilian, 2011. "The Allocative Cost of Price Ceilings in the U.S. Residential Market for Natural Gas," Journal of Political Economy, University of Chicago Press, vol. 119(2), pages 212 - 241.
- An, Mark Yuying, 1995.
"Logconcavity versus Logconvexity: A Complete Characterization,"
95-03, Duke University, Department of Economics.
- An, Mark Yuying, 1998. "Logconcavity versus Logconvexity: A Complete Characterization," Journal of Economic Theory, Elsevier, vol. 80(2), pages 350-369, June.
- Edward L. Glaeser & Erzo F. P. Luttmer, 2003.
"The Misallocation of Housing Under Rent Control,"
American Economic Review,
American Economic Association, vol. 93(4), pages 1027-1046, September.
- Mark Bagnoli & Ted Bergstrom, 2005.
"Log-concave probability and its applications,"
Springer, vol. 26(2), pages 445-469, 08.
- A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
- R. Quentin Grafton & Michael B. Ward, 2008. "Prices versus Rationing: Marshallian Surplus and Mandatory Water Restrictions," The Economic Record, The Economic Society of Australia, vol. 84(s1), pages S57-S65, 09.
- Filip Palda, 2001.
"Some Deadweight Losses from the Minimum Wage: The Cases of Full and Partial Compliance,"
Labor and Demography
- Palda, Filip, 2000. "Some deadweight losses from the minimum wage: the cases of full and partial compliance," Labour Economics, Elsevier, vol. 7(6), pages 751-783, November.
- W. Kip Viscusi & Joseph E. Harrington & John M. Vernon, 2005. "Economics of Regulation and Antitrust, 4th Edition," MIT Press Books, The MIT Press, edition 4, volume 1, number 026222075x, June.
- Simon Cowan, 2012.
"Third-Degree Price Discrimination and Consumer Surplus,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 60(2), pages 333-345, 06.
- Simon GB Cowan & Simon Cowan, 2009. "Third-Degree Price Discrimination and Consumer Surplus," Economics Series Working Papers 462, University of Oxford, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maxine Collett).
If references are entirely missing, you can add them using this form.