Public sector rationing and private sector selection [paper accepted and forthcoming in Journal of Public Economic Theory]

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State: Serval
Version: author
Serval ID
serval:BIB_24E39B5D163F
Type
Report: a report published by a school or other institution, usually numbered within a series.
Publication sub-type
Working paper: Working papers contain results presented by the author. Working papers aim to stimulate discussions between scientists with interested parties, they can also be the basis to publish articles in specialized journals
Collection
Publications
Title
Public sector rationing and private sector selection [paper accepted and forthcoming in Journal of Public Economic Theory]
Author(s)
Grassi Simona, Ma Ching-to Albert
Institution
Boston University- Department of Economics
Issued date
06/2010
Number
2009-a
Genre
Working paper
Language
english
Number of pages
39
Abstract
We study the interaction between nonprice public rationing and prices in the private market. Under a limited budget, the public supplier uses a rationing policy. A private firm may supply the good to those consumers who are rationed by the public system. Consumers have different amounts of wealth, and costs of providing the good to them vary. We consider two regimes. First, the public supplier observes consumers' wealth information; second, the public supplier observes both wealth and cost information. The public supplier chooses a rationing policy, and, simultaneously, the private firm, observing only cost but not wealth information, chooses a pricing policy. In the first regime, there is a continuum of equilibria. The Pareto dominant equilibrium is a means-test equilibrium: poor consumers are supplied while rich consumers are rationed. Prices in the private market increase with the budget. In the second regime, there is a unique equilibrium. This exhibits a cost-effectiveness rationing rule; consumers are supplied if and only if their costbenefit ratios are low. Prices in the private market do not change with the budget. Equilibrium consumer utility is higher in the cost-effectiveness equilibrium than the means-test equilibrium [Authors]
Create date
18/10/2010 17:04
Last modification date
03/03/2018 15:00
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