Price Controls and Consumer Surplus

Jeremy Bulow and Paul Klemperer
Additional contact information
Jeremy Bulow: Graduate School of Business, Stanford University, Stanford, USA

No 2009-W07, Economics Papers from Economics Group, Nuffield College, University of Oxford

Abstract: 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.

Keywords: Rationing; Allocative Efficiency; Microeconomic Theory; Marginal Revenue; Minimum Wage; Rent Control; Consumer Welfare (search for similar items in EconPapers)
JEL-codes: D45 D6 D61 (search for similar items in EconPapers)
Pages: 11 pages
Date: 2009-07-01
New Economics Papers: this item is included in nep-com, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nuffield.ox.ac.uk/economics/papers/2009/w7/PCCS%2008.10.09.pdf (application/pdf)

Related works:
Working Paper: Price Controls and Consumer Surplus (2011)
Working Paper: Price Controls and Consumer Surplus (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nuf:econwp:0907

Access Statistics for this paper

More papers in Economics Papers from Economics Group, Nuffield College, University of Oxford Contact information at EDIRC.
Bibliographic data for series maintained by Maxine Collett ().