An Equilibrium Theory of Rationing

Richard J. Gilbert () and Paul Klemperer ()

Microeconomics from EconWPA

Abstract: Setting a price that results in rationing may be optimal for a seller whose customers must make a specific investment to be able to use its product. Rationing results in ex-post inefficiency, but the resulting distribution of ex-post surplus can compensate consumers for their transaction-specific investments at a lower cost to the seller's profits than would market-clearing prices. Similarly, it may be optimal for a purchaser to procure some of its requirements from a high-cost "second source" rather than purchase only from the lowest-cost supplier.

Keywords: rationing; sunk; costs (search for similar items in EconPapers)
JEL-codes: D45 L10 L14 (search for similar items in EconPapers)
Date: 1999-07-19
Note: Type of Document - Word/PDF; prepared on IBM PC - PC-TEX/UNIX Sparc TeX; to print on HP/PostScript; pages: 34 ; figures: included. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.
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Related works:
Working Paper: An Equilibrium Theory of Rationing (1993)
Journal Article: An Equilibrium Theory of Rationing (2000)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpmi:9907005

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