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The Price Ceiling that Minimizes an Exporter’s Profits Without Raising the Buyers’ Price Excessively

Author

Listed:
  • Stephen W. Salant
  • Diego S. Cardoso
  • Julien Xavier Daubanes

Abstract

To reduce Russia's ability to fund its war in Ukraine, Western governments imposed a price ceiling on Russian seaborne oil exports. Policy-makers sought a ceiling level to lower Russia's oil profits without raising excessively the world price buyers pay for oil. Previous analyses have explored this problem using simulations and, with a single exception, have treated the non-Russian supply response as exogenous. We pose the problem theoretically as a constrained minimization problem of the policy maker and solve it, treating Russia as either a monopolist or an oligopolist facing heterogeneous rivals with endogenous supply.

Suggested Citation

  • Stephen W. Salant & Diego S. Cardoso & Julien Xavier Daubanes, 2026. "The Price Ceiling that Minimizes an Exporter’s Profits Without Raising the Buyers’ Price Excessively," CESifo Working Paper Series 12608, CESifo.
    • Handle: RePEc:ces:ceswps:_12608
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    References listed on IDEAS

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    1. Johnson, Simon & Rachel, Lukasz & Wolfram, Catherine, 2023. "Design and implementation of the price cap on Russian oil exports," Journal of Comparative Economics, Elsevier, vol. 51(4), pages 1244-1252.
    2. Turner, Douglas C. & Sappington, David E.M., 2024. "On the design of price caps as sanctions," International Journal of Industrial Organization, Elsevier, vol. 97(C).
    3. Johan Gars & Daniel Spiro & Henrik Wachtmeister, 2025. "Winners and losers of a Russian oil-export restriction," Public Choice, Springer, vol. 205(3), pages 387-417, December.
    4. Lutz Kilian & David Rapson & Burkhard Schipper, 2026. "The Impact of the 2022 Oil Embargo and Price Cap on Russian Oil Prices," The Energy Journal, , vol. 47(3), pages 1-39, May.
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    Keywords

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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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