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

H. E. Frech III; William C. Lee^1,2

¹ Saint Mary's College of California · ² St. Mary's College

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.

DOI

10.2307/1884682

Volume

102 (1)

Pages

97

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