Price Controls and Consumer Surplus
The condition for when a price control increases consumer welfare in perfect competition is tighter than often realised. When demand is linear, a small restriction on price only increases consumer surplus if the elasticity of demand exceeds the elasticity of supply; with log-linear or constant-elasticity, demand consumers are always hurt by price controls. The results are best understood - and can be related to monopoly-theory results - using the fact that consumer surplus equals the area between the demand curve and the industry marginal-revenue curve.
|Date of creation:||01 Jul 2009|
|Date of revision:|
|Contact details of provider:|| Web page: https://www.nuffield.ox.ac.uk/economics/|
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.:
- Filip Palda, 2001.
"Some Deadweight Losses from the Minimum Wage: The Cases of Full and Partial Compliance,"
Labor and Demography
- Palda, Filip, 2000. "Some deadweight losses from the minimum wage: the cases of full and partial compliance," Labour Economics, Elsevier, vol. 7(6), pages 751-783, November.
- An, Mark Yuying, 1998.
"Logconcavity versus Logconvexity: A Complete Characterization,"
Journal of Economic Theory,
Elsevier, vol. 80(2), pages 350-369, June.
- An, Mark Yuying, 1995. "Logconcavity versus Logconvexity: A Complete Characterization," Working Papers 95-03, Duke University, Department of Economics.
- Mark Bagnoli & Ted Bergstrom, 2005.
"Log-concave probability and its applications,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(2), pages 445-469, 08.
- Erzo F.P. Luttmer, 2007.
"Does the Minimum Wage Cause Inefficient Rationing?,"
NBER Working Papers
13012, National Bureau of Economic Research, Inc.
- 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.
- Luttmer, Erzo F.P., 2007. "Does the Minimum Wage Cause Inefficient Rationing?," IZA Discussion Papers 2713, Institute for the Study of Labor (IZA).
- Luttmer, Erzo F. P., 2007. "Does the Minimum Wage Cause Inefficient Rationing?," Working Paper Series rwp07-018, Harvard University, John F. Kennedy School of Government.
- Edward L. Glaeser & Erzo F. P. Luttmer, 1997.
"The Misallocation of Housing Under Rent Control,"
NBER Working Papers
6220, National Bureau of Economic Research, Inc.
- R. Quentin Grafton & Michael B. Ward, 2008. "Prices versus Rationing: Marshallian Surplus and Mandatory Water Restrictions," The Economic Record, The Economic Society of Australia, vol. 84(s1), pages S57-S65, 09.
- W. Kip Viscusi & Joseph E. Harrington & John M. Vernon, 2005. "Economics of Regulation and Antitrust, 4th Edition," MIT Press Books, The MIT Press, edition 4, volume 1, number 026222075x.
- Lucas W. Davis & Lutz Kilian, 2008.
"The Allocative Cost of Price Ceilings in the U.S. Residential Market for Natural Gas,"
NBER Working Papers
14030, National Bureau of Economic Research, Inc.
- 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.
- A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
When requesting a correction, please mention this item's handle: RePEc:nuf:econwp:0907. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maxine Collett)
If references are entirely missing, you can add them using this form.