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The Welfare Implications of Rent Control: A Rent-Seeking Contest Approach

Listed author(s):
  • Chang Yang-Ming

    ()

    (Kansas State University)

  • Sanders Shane D.

    ()

    (Nicholls State University)

This paper uses a contest approach to characterize a probabilistic, non-price contest between potential consumers of rent-controlled apartments. The model extends upon the rent control model of Glaeser and Luttmer (2003) as well as the rent-seeking contributions of Hurley (1998), Dixit (1987), and Hirshleifer (1989) to consider the roles of chance and endogenously-chosen efforts in the allocation of rent-controlled apartments. Nash equilibrium effort levels for each consumer-type imply that the effort-inducing cost of rent control is greater than the misallocative cost. Further, misallocative costs are lower under the effort contest interpretation than under random allocation, as high willingness to pay consumers allocates more effort. The relationship between effort contest and misallocation influences the policys overall social cost.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 10 (2010)
Issue (Month): 1 (October)
Pages: 1-20

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Handle: RePEc:bpj:bejeap:v:10:y:2010:i:1:n:95
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  1. Gyourko, Joseph & Linneman, Peter, 1989. "Equity and efficiency aspects of rent control: An empirical study of New York City," Journal of Urban Economics, Elsevier, vol. 26(1), pages 54-74, July.
  2. Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-898, December.
  3. Edward L. Glaeser, 1996. "The Social Costs of Rent Control Revisited," NBER Working Papers 5441, National Bureau of Economic Research, Inc.
  4. Jack Hirshleifer, 1989. "Conflict and rent-seeking success functions: Ratio vs. difference models of relative success," Public Choice, Springer, vol. 63(2), pages 101-112, November.
  5. Olsen, Edgar O, 1972. "An Econometric Analysis of Rent Control," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1081-1100, Nov.-Dec..
  6. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290, February.
  7. Suen, Wing, 1989. "Rationing and Rent Dissipation in the Presence of Heterogeneous Individuals," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1384-1394, December.
  8. Barzel, Yoram, 1974. "A Theory of Rationing by Waiting," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 73-95, April.
  9. H. E. Frech III & William C. Lee, 1987. "The Welfare Cost of Rationing-By-Queuing Across Markets: Theory and Estimates from the U. S. Gasoline Crises," The Quarterly Journal of Economics, Oxford University Press, vol. 102(1), pages 97-108.
  10. Richard Arnott, 1995. "Time for Revisionism on Rent Control?," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 99-120, Winter.
  11. Moon, Choon-Geol & Stotsky, Janet G, 1993. "The Effect of Rent Control on Housing Quality Change: A Longitudinal Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 1114-1148, December.
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