Understanding Price Controls and Nonprice Competition with Matching Theory
نویسندگان
چکیده
Price controls are one of the most common forms of market intervention by regulatory authorities. Price setting was a central duty of the Civil Aeronautics Board until the Airline Deregulation Act of 1978. The Dairy Price Support Program sets a minimum price for milk and other dairy products in the United States. Price caps for pharmaceutical drugs are a pervasive form of government intervention in Europe. And minimum wage laws set a price floor for labor throughout the developed world. A great deal of empirical work suggests that price controls induce quality-based competition between sellers. However, competitive equilibria often fail to exist when price controls are present, and hence theoretical analysis of the effects of price controls has proven difficult. In particular, this lack of a theoretical foundation
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