Queue-rationed equilibria with fixed costs of waiting

Keywords

Queue rationing, Price controls, Endogenous fixed cost

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.

Original Publication Citation

“Queue-Rationed Equilibria with Fixed Costs of Waiting,” by Brennan Platt. Economic Theory. 40:247-274, August 2009.

Document Type

Peer-Reviewed Article

Publication Date

2009-8

Permanent URL

http://hdl.lib.byu.edu/1877/8523

Publisher

Economic Theory

Language

English

College

Family, Home, and Social Sciences

Department

Economics

University Standing at Time of Publication

Full Professor

Link to Full Text

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