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Economic Theory

, Volume 40, Issue 2, pp 247–274 | Cite as

Queue-rationed equilibria with fixed costs of waiting

  • Brennan C. Platt
Research Article

Abstract

The welfare impact of price controls is examined here in an exchange economy where agents may need to queue in order to make a transaction. Time spent in the queue is an endogenously-determined transaction cost, which agents take as given and which adjusts so as to clear markets when prices are prevented from performing this function. When queuing is required, it enters the household’s decision as a fixed cost, rather than increasing in proportion to the amount of good exchanged, as is far more common in the previous literature. Existence of competitive equilibrium is established for this general equilibrium model. Price controls are shown to cause notable inefficiencies, which differ from those of a proportional cost model. Moreover, in certain environments, price controls will unambiguously harm all individuals relative to a Walrasian equilibrium.

Keywords

Queue rationing Price controls Endogenous fixed cost 

JEL Classification

D45 D51 D61 P22 

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Copyright information

© Springer-Verlag 2008

Authors and Affiliations

  1. 1.Department of EconomicsBrigham Young UniversityProvoUSA

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