The Welfare Cost of Rationing-By-Queuing Across Markets: Theory and Estimates from the U. S. Gasoline Crises

Harry Frech and William C. Lee

The Quarterly Journal of Economics, 1987, vol. 102, issue 1, 97-108

Abstract: Governments sometimes impose price controls and nonprice rationing-by-queuing. Profit-seeking firms occasionally ration by putting their customers on "allocation." Following Barzel [1974] and Deacon and Sonstelie [1985], we take the decision to ration as a given and analyze it, employing standard microeconomics and applied welfare economics. This paper adds to the literature by focusing on optimally rationing a good across markets. Further, we estimate the actual welfare cost of improper allocation across markets in the U. S. gasoline crises of 1973–1974 and 1979.

Date: 1987
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