Today is an IO-intensive day in the department.
In addition to our usual lunch (Randall Lewis) and workshop (John
Asker), the Labor/PF seminar at 4 p.m., following John Asker's
seminar, has a very IO theme today. Lucas Davis, who is visiting the
department this year from Michigan, is presenting his research on
consumer welfare effects of price ceilings in the natural gas market.
I encourage all of you, and especially those with interest in energy
markets or in economic regulation, to attend.
NLR
From:
Malinda Nicolosi [mailto:malindan@MIT.EDU]
Sent: Thursday, November 20, 2008 3:22 PM
To: @undisclosed-recipients
Subject: Labor/Public Finance Workshop - Lucas Davis - Monday
the 24th.
Lucas Davis will be presenting: The Allocation Cost of Price
Ceilings in
the U.S. Residential Market for Natural Gas
Abstract:
A
direct consequence of imposing a ceiling on the price of a good for
which
secondary markets
do not
exist, is
that, when there is excess demand, the good will not be allocated to
the buyers
who value
it the
most. The resulting allocative cost has been discussed in the
literature as a
potentially
important component of the total welfare loss from price ceilings, but
its
practical
importance
has yet
to be established empirically. In this paper, we address this question
using
data for
the U.S.
residential market for natural gas which was subject to price ceilings
during
1954-1989.
This
market is well suited for such an empirical analysis and important, as
natural
gas
price
ceilings
affected millions of households. Using a household-level,
discrete-continuous
model
of natural
gas
demand, we estimate that the allocative cost in the U.S. residential
market for
natural
gas averaged
$4.6 billion
annually since
the 1950s, effectively tripling previous estimates
of the net
welfare
loss to U.S. consumers. We quantify the evolution of this allocative
cost and
its
geographical
distribution during the post-war period, and we highlight implications
of our
analysis
for the
regulation of other markets
Location: E51-151
Time: 4:00 - 5:30
Paper is attached.
This semester's program schedule can be found at: http://econ-www.mit.edu/events?offset=1
--
Malinda Nicolosi
Administrative Assistant
MIT
Department of Economics
50 Memorial Drive
Suite E52-352
Cambridge, MA 02142
phone: 617-258-0777
fax: 617-253-1330
malindan@mit.edu
