The welfare implications of rent control: A rent-seeking contest approach

Yang Ming Chang, Shane D. Sanders

Research output: Contribution to journalArticle

2 Scopus citations

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.

Original languageEnglish (US)
Article number95
JournalB.E. Journal of Economic Analysis and Policy
Volume10
Issue number1
DOIs
StatePublished - Jan 1 2010
Externally publishedYes

Keywords

  • market
  • price control
  • rent control
  • welfare

ASJC Scopus subject areas

  • Economics and Econometrics
  • Economics, Econometrics and Finance (miscellaneous)

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