ICES Experimental Economics Brown Bag Lecture

Storage and Price Controls: An Experiment

Thursday, April 21, 2022 12:00 PM to 1:00 PM EDT
Online Location, Zoom Meeting

ICES Experimental Economics Brown Bag Lecture

The Interdisciplinary Center for Economic Science (ICES) presents an ICES Brown Bag Lecture featuring:

Edgar Castro

George Mason University

Storage and Price Controls: An Experiment

 

Please contact ICES Office Manager (sbahabib@gmu.edu) for Zoom link.

 

Abstract

Governments try to impose maximum prices to improve affordability. A simple static model predicts scarcity and dead-weight loss. We use a two-period model with durable goods to predict the effect of maximum price regulation with storage when price controls are fully anticipated in the second period. Under a price ceiling regulation, our model predicts an increase in prices and hoarding in the first period due to the possibility of rationing in the second period. Impacts are different for low-value and high-value consumers. While low-value consumers are pushed out of the market in the first period, in equilibrium, they will be able to consume in the second period when the price regulation takes place. We propose a laboratory experiment to test the theory.

 

For more information about the Brown Bag Lectures, please visit the Brown Bag Schedule homepage.

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