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Prices vs. Quantities: The Political Perspective

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  • Finkelshtain, Israel
  • Kislev, Yoav

Abstract

Regulation regimes subject to influence of interest groups are compared. It is shown that allocation of the regulated commodity varies with the implemented control and that the advantage of prices (vs. quotas) increases with the elasticity of the demand or the supply of the commodity and decreases with the number of organized producers in the regulated industry. Control regimes can be ranked for negative, but not for positive, externalities. An optimal policy combination, mixing prices and quotas, is identified and limitation on its application are discussed.

Suggested Citation

  • Finkelshtain, Israel & Kislev, Yoav, 1995. "Prices vs. Quantities: The Political Perspective," Working Papers 232682, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    • Handle: RePEc:ags:huaewp:232682
    DOI: 10.22004/ag.econ.232682
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    References listed on IDEAS

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    1. Martin L. Weitzman, 1974. "Prices vs. Quantities," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(4), pages 477-491.
    2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    3. Zusman, Pinhas & Rausser, Gordon C., 1994. "Intraorganizational influence relations and the optimality of collective action," Journal of Economic Behavior & Organization, Elsevier, vol. 24(1), pages 1-17, June.
    4. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    5. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(1), pages 1-31.
    6. Zusman, Pinhas, 1976. "The Incorporation and Measurement of Social Power in Economic Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 447-462, June.
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    Cited by:

    1. Finkelshtain, Israel & Kislev, Yoav, 1996. "Economic Regulation and Political Influence," Working Papers 232692, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    2. Finkelshtain, Israel & Kislev, Yoav, 1997. "Prices versus Quantities: The Political Perspective," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 83-100, February.

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    Demand and Price Analysis;

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