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The Welfare Costs of Rationing by Waiting

  • Deacon, Robert T
  • Sonstelie, Jon

With price controls and rationing by waiting, rational consumers increase the quantity bought per purchase. This individually rational response is socially wasteful and the cost of making it is a deadweight loss. This cost plus the value of time spent in queues may exceed the total rent transferred from suppliers to consumers by price controls, i.e., the value of resources spent competing for the rent may exceed the rent itself. This point is illustrated by an empirical application to gasoline price controls. Rent seeking exhausts an estimated 116 percent of the rent transferred. Copyright 1989 by Oxford University Press.

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Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 27 (1989)
Issue (Month): 2 (April)
Pages: 179-96

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Handle: RePEc:oup:ecinqu:v:27:y:1989:i:2:p:179-96
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