An Equilibrium Theory of Rationing
AbstractSetting a price that results in rationing may be optimal for a seller whose customers must make a specific investment to be able to use its product. Rationing results in ex-post inefficiency, but the resulting distribution of ex-post surplus can compensate consumers for their transaction-specific investments at a lower cost to the seller's profits than would market-clearing prices. Similarly, it may be optimal for a purchaser to procure some of its requirements from a high-cost "second source" rather than purchase only from the lowest-cost supplier.
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 EconWPA in its series Microeconomics with number 9907005.
Length: 34 pages
Date of creation: 19 Jul 1999
Date of revision:
Note: Type of Document - Word/PDF; prepared on IBM PC - PC-TEX/UNIX Sparc TeX; to print on HP/PostScript; pages: 34 ; figures: included. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.
Contact details of provider:
Web page: http://188.8.131.52
rationing sunk costs;
Other versions of this item:
- D45 - Microeconomics - - Market Structure and Pricing - - - Rationing; Licensing
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-02-14 (All new papers)
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.:
- Stole, Lars A., 1994. "Information expropriation and moral hazard in optimal second-source auctions," Journal of Public Economics, Elsevier, vol. 54(3), pages 463-484, July.
- Slade, M.E., 1988. "Strategic Pricing With Customer Rationing: The Case Of Primary Metals," UBC Departmental Archives 88-28, UBC Department of Economics.
- Martin L. Weitzman, 1977.
"Is the Price System or Rationing More Effective in Getting a Commodity to Those Who Need It Most?,"
Bell Journal of Economics,
The RAND Corporation, vol. 8(2), pages 517-524, Autumn.
- M. L. Weitzman, 1974. "Is the Price System or Rationing More Effective in Getting a Commodity to Those Who Need It Most?," Working papers 140, Massachusetts Institute of Technology (MIT), Department of Economics.
- Png, I P L, 1991. "Most-Favored-Customer Protection versus Price Discrimination over Time," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 1010-28, October.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Rotemberg, Julio J & Summers, Lawrence H, 1990. "Inflexible Prices and Procyclical Productivity," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 851-74, November.
- Margaret E. Slade, 1991. "Strategic Pricing with Customer Rationing: The Case of Primary Metals," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 70-100, February.
- Klemperer, Paul D & Meyer, Margaret A, 1989. "Supply Function Equilibria in Oligopoly under Uncertainty," Econometrica, Econometric Society, vol. 57(6), pages 1243-77, November.
- Levin, Dan & Smith, James L, 1994. "Equilibrium in Auctions with Entry," American Economic Review, American Economic Association, vol. 84(3), pages 585-99, June.
- Paul Klemperer, 2000. "Why Every Economist Should Learn some Auction Theory," Economics Series Working Papers 2000-W25, University of Oxford, Department of Economics.
- Courty, Pascal, 2011.
Elsevier, vol. 111(1), pages 13-15, April.
- Hyytinen, Ari & Väänänen, Lotta, 2004. "Could Mr. and Mrs. Capital Market Imperfection Please Step Forward? An Empirical Analysis of Adverse Selection and Moral Hazard in Capital Markets," Discussion Papers 887, The Research Institute of the Finnish Economy.
- Paul Klemperer, 2000.
"Why Every Economist Should Learn Some Auction Theory,"
- Klemperer, Paul, 2000. "Why every Economist should Learn some Auction Theory," CEPR Discussion Papers 2572, C.E.P.R. Discussion Papers.
- Ken Binmore & Paul Klemperer, 2002.
"The Biggest Auction Ever: the Sale of the British 3G Telecom Licences,"
Royal Economic Society, vol. 112(478), pages C74-C96, March.
- Binmore, Kenneth & Klemperer, Paul, 2002. "The Biggest Auction Ever: The Sale of the British 3G Telecom Licences," CEPR Discussion Papers 3214, C.E.P.R. Discussion Papers.
- Ken Binmore & Paul Klemperer, 2001. "The Biggest Auction Ever: the Sale of the British 3G Telecom Licenses," Economics Papers 2002-W4, Economics Group, Nuffield College, University of Oxford, revised 01 Sep 2001.
- Peck, James, 1996.
"Competition in Transactions Mechanisms: The Emergence of Price Competition,"
Games and Economic Behavior,
Elsevier, vol. 16(1), pages 109-123, September.
- James Peck, 1995. "Competition in Transactions Mechanisms: The Emergence of Price Competition," Working Papers 022, Ohio State University, Department of Economics.
- Michael J. Dueker, 2000. "Are prime rate changes asymmetric?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 33-40.
- Greve,T. & Pollitt, M. G., 2012. "Designing electiricty transmission auctions: an introduction to the relevant literature," Cambridge Working Papers in Economics 1245, Faculty of Economics, University of Cambridge.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.