The Welfare Effect of a Consumer Subsidy with Price Ceilings: The Case of Chinese Cell Phones

Ying Fan () and Ge Zhang

No 28659, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Subsidies to consumers may cause firms to charge higher prices, which offsets consumer benefits from subsidies. We study a subsidy program design that mitigates such price increases by making products' eligibility for a subsidy dependent on firms' commitment to price ceilings. To quantify the importance of such competition for eligibility, we develop a structural model and an estimation procedure that accommodate binding pricing constraints. We find that competition for eligibility mitigates the price increases arising from the subsidy and even leads to a reduction in prices for some products. It improves consumer and total surpluses while limiting government subsidy payments.

JEL-codes: D4 H2 L1 (search for similar items in EconPapers)
Date: 2021-04
New Economics Papers: this item is included in nep-com, nep-pay and nep-reg
Note: IO PE
References: Add references at CitEc
Citations:

Published as Ying Fan & Ge Zhang, 2022. "The welfare effect of a consumer subsidy with price ceilings: the case of Chinese cell phones," The RAND Journal of Economics, vol 53(2), pages 429-449.

Downloads: (external link)
http://www.nber.org/papers/w28659.pdf (application/pdf)

Related works:
Journal Article: The welfare effect of a consumer subsidy with price ceilings: the case of Chinese cell phones (2022)
Working Paper: The Welfare Effect of a Consumer Subsidy with Price Ceilings: The Case of Chinese Cell Phones (2021)
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:nbr:nberwo:28659

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28659

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().