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The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Jürges, Hendrik / Ludwig, Sandra

Ed. by Auriol , Emmanuelle / Brunner, Johann / Fleck, Robert / Mendola, Mariapia / Requate, Till / Schirle, Tammy / de Vries, Frans / Zulehner, Christine

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1935-1682
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Volume 10, Issue 1 (Oct 2010)

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The Welfare Implications of Rent Control: A Rent-Seeking Contest Approach

Yang-Ming Chang
  • 1Kansas State University,
/ Shane D. Sanders
  • 2Nicholls State University,
Published Online: 2010-10-07 | DOI: https://doi.org/10.2202/1935-1682.2369

Abstract

This paper uses a contest approach to characterize a probabilistic, non-price contest between potential consumers of rent-controlled apartments. The model extends upon the rent control model of Glaeser and Luttmer (2003) as well as the rent-seeking contributions of Hurley (1998), Dixit (1987), and Hirshleifer (1989) to consider the roles of chance and endogenously-chosen efforts in the allocation of rent-controlled apartments. Nash equilibrium effort levels for each consumer-type imply that the effort-inducing cost of rent control is greater than the misallocative cost. Further, misallocative costs are lower under the effort contest interpretation than under random allocation, as high willingness to pay consumers allocates more effort. The relationship between effort contest and misallocation influences the policy’s overall social cost.

Keywords: rent control; welfare; market; price control

About the article

Published Online: 2010-10-07


Citation Information: The B.E. Journal of Economic Analysis & Policy, ISSN (Online) 1935-1682, DOI: https://doi.org/10.2202/1935-1682.2369. Export Citation

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[1]
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