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Estimating demand elasticities under rationing

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  • Adrian R. Fleissig
  • Gerald A. Whitney

Abstract

Eliminating rationing in the United Kingdom following the Second World War was a concern for policy-makers because of potentially large fluctuations in post-war prices and the impact on unrationed goods. This study shows that in using virtual prices, elasticities can be estimated from a 'free' demand system consistent with observed consumer choices. Substitution estimates without accounting for rationing are misleading. In contrast, using virtual prices and estimating a 'free' market system yield results similar to those of the pre-war period. Results show that food rationing affected expenditure across unrationed goods. Rationing on other services had little effect on expenditure across unrationed goods.

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  • Adrian R. Fleissig & Gerald A. Whitney, 2014. "Estimating demand elasticities under rationing," Applied Economics, Taylor & Francis Journals, vol. 46(4), pages 432-440, February.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:4:p:432-440
    DOI: 10.1080/00036846.2013.849379
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    References listed on IDEAS

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    1. Mackay, Robert J & Whitney, Gerald A, 1980. "The Comparative Statics of Quantity Constraints and Conditional Demands: Theory and Applications," Econometrica, Econometric Society, vol. 48(7), pages 1727-1744, November.
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    5. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
    6. Fleissig, Adrian R. & Whitney, Gerald, 2011. "A revealed preference test of rationing," Economics Letters, Elsevier, vol. 113(3), pages 234-236.
    7. Fleissig, Adrian R. & Whitney, Gerald, 2013. "Virtual prices and the impact of house rationing in Belgium on consumer choices," Explorations in Economic History, Elsevier, vol. 50(2), pages 308-315.
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    Cited by:

    1. Fleissig, Adrian R. & Whitney, Gerald A., 2015. "Belgium relief fund, post war food shortages and the “True” cost of living," Explorations in Economic History, Elsevier, vol. 58(C), pages 93-106.

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