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The Welfare Cost of Rationing-By-Queuing Across Markets: Theory and Estimates from the U. S. Gasoline Crises

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  • H. E. Frech III
  • William C. Lee

Abstract

Governments sometimes impose price controls and nonprice rationing-by-queuing. Profit-seeking firms occasionally ration by putting their customers on "allocation." Following Barzel [1974] and Deacon and Sonstelie [1985], we take the decision to ration as a given and analyze it, employing standard microeconomics and applied welfare economics. This paper adds to the literature by focusing on optimally rationing a good across markets. Further, we estimate the actual welfare cost of improper allocation across markets in the U. S. gasoline crises of 1973–1974 and 1979.

Suggested Citation

  • 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, President and Fellows of Harvard College, vol. 102(1), pages 97-108.
    • Handle: RePEc:oup:qjecon:v:102:y:1987:i:1:p:97-108.
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    Cited by:

    1. LaPlue, Lawrence D., 2022. "Environmental consequences of natural gas wellhead pricing deregulation," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).
    2. Fleck, Robert K., 2014. "Can prohibitions on “price gouging” reduce deadweight losses?," International Review of Law and Economics, Elsevier, vol. 37(C), pages 100-107.
    3. Lucas W. Davis, Shaun Mcrae, and Enrique Seira Bejarano, 2019. "An Economic Perspective on Mexico's Nascent Deregulation of Retail Petroleum Markets," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).
    4. 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.
    5. Jessica Wolpaw Reyes, 2006. "Do Female Physicians Capture Their Scarcity Value? The Case of OB/GYNs," NBER Working Papers 12528, National Bureau of Economic Research, Inc.
    6. Colgan, Jeff D., 2014. "The Emperor Has No Clothes: The Limits of OPEC in the Global Oil Market," International Organization, Cambridge University Press, vol. 68(3), pages 599-632, July.
    7. James T. Moser, 2002. "The immediacy implications of exchange organization," Working Paper Series WP-02-09, Federal Reserve Bank of Chicago.
    8. Aart Gerritsen & Bas Jacobs, 2020. "Is a Minimum Wage an Appropriate Instrument for Redistribution?," Economica, London School of Economics and Political Science, vol. 87(347), pages 611-637, July.
    9. David H. Autor & Christopher J. Palmer & Parag A. Pathak, 2014. "Housing Market Spillovers: Evidence from the End of Rent Control in Cambridge, Massachusetts," Journal of Political Economy, University of Chicago Press, vol. 122(3), pages 661-717.
    10. Kisswani, Khalid/ M., 2011. "The effects of the U.S. price control policies on OPEC: lessons from the past," MPRA Paper 34624, University Library of Munich, Germany.
    11. 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.
    12. Aart Gerritsen, 2016. "How Many Harberger Triangles Does it Take to Fill one Okun Gap?," Working Papers tax-mpg-rps-2016-05, Max Planck Institute for Tax Law and Public Finance.
    13. Jordi Galí, 2011. "Comment on "Oil, Automobiles, and the US Economy: How Much Have Things Really Changed?"," NBER Chapters, in: NBER Macroeconomics Annual 2010, volume 25, pages 369-373, National Bureau of Economic Research, Inc.
    14. Aart Gerritsen, 2016. "Equity and Efficiency in Rationed Labor Markets," Working Papers tax-mpg-rps-2016-04, Max Planck Institute for Tax Law and Public Finance.
    15. Chang Yang-Ming & Sanders Shane D., 2010. "The Welfare Implications of Rent Control: A Rent-Seeking Contest Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-20, October.
    16. Reiffen, David & Buyuksahin, Bahattin, 2010. "The puzzle of privately-imposed price limits: are the limits imposed by financial exchanges effective?," MPRA Paper 35927, University Library of Munich, Germany.
    17. Nicholas Ryan & Anant Sudarshan, 2020. "Rationing the Commons," Working Papers 2020-93, Becker Friedman Institute for Research In Economics.
    18. Casey B. Mulligan & Kevin K. Tsui, 2016. "The Upside-down Economics of Regulated and Otherwise Rigid Prices," NBER Working Papers 22305, National Bureau of Economic Research, Inc.
    19. Gerritsen, Aart, 2017. "Equity and efficiency in rationed labor markets," Journal of Public Economics, Elsevier, vol. 153(C), pages 56-68.
    20. Nicholas Ryan & Anant Sudarshan, 2020. "Rationing the Commons," Cowles Foundation Discussion Papers 2239, Cowles Foundation for Research in Economics, Yale University.
    21. Nicholas Ryan & Anant Sudarshan, 2020. "Rationing the Commons," NBER Working Papers 27473, National Bureau of Economic Research, Inc.

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