Pro-Consumer Price Ceilings under Regulatory Uncertainty

Bennett, John; Chioveanu, Ioana

Abstract

We examine optimal price ceilings when the regulator is uncertain about demand and maximizes expected consumer surplus. With perfect competition, large enough regulatory uncertainty calls for softer intervention, with the price ceiling set at a relatively high level compared to a full information scenario. In an imperfectly competitive setting where symmetric …rms compete in supply functions, with large enough uncertainty, the optimal ceiling increases in the degree of competition, so greater competitive pressure justi…es less restrictive regulation. Under perfect competition , we also pin down a cut-o¤ level of rationing e¢ ciency below which a price ceiling should not be used.

Citation

Bennett, J., & Chioveanu, I. (2019). Pro-Consumer Price Ceilings under Regulatory Uncertainty. Scandinavian Journal of Economics, 121(4), 1757-1784. https://doi.org/10.1111/sjoe.12298

• Journal Article Type: Article
• Acceptance Date: Mar 6, 2018
• Online Publication Date: Mar 11, 2018
• Publication Date: Oct 1, 2019
• Deposit Date: Mar 12, 2020
• Publicly Available Date: Mar 13, 2020
• Journal: Scandinavian Journal of Economics
• Print ISSN: 0347-0520
• Electronic ISSN: 1467-9442
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 121
• Issue: 4
• Pages: 1757-1784
• DOI: https://doi.org/10.1111/sjoe.12298
• Keywords: price caps; consumer surplus; competition; rationing
• Public URL: https://nottingham-repository.worktribe.com/output/4131958
• Publisher URL: https://onlinelibrary.wiley.com/doi/full/10.1111/sjoe.12298