On the design of price caps as sanctions

Douglas Turner and David Sappington

International Journal of Industrial Organization, 2024, vol. 97, issue C

Abstract: A ceiling has been imposed on the price at which Russian producers can sell oil. The price cap is intended to reduce Russian government tax revenue without increasing the world price of oil excessively. We show that such price caps can have counterintuitive effects. A price cap can induce sanctioned producers to increase their output, thereby increasing their revenue. This increased output can also reduce the world price of the homogeneous product supplied by sanctioned and non-sanctioned producers. The welfare-maximizing price cap, which is often well below the unrestricted world price, can increase welfare substantially.

Keywords: Price caps; Sanctions; Limiting tax revenue (search for similar items in EconPapers)
JEL-codes: D43 D60 L13 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167718724000547
Full text for ScienceDirect subscribers only

Related works:
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:eee:indorg:v:97:y:2024:i:c:s0167718724000547

DOI: 10.1016/j.ijindorg.2024.103099

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().