The welfare effect of a consumer subsidy with price ceilings: the case of Chinese cell phones

• 成果类型: Article
• 署名作者: Fan, Ying; Zhang, Ge
• 署名单位: University of Michigan System; University of Michigan; Center for Economic & Policy Research (CEPR); National Bureau of Economic Research; Amazon.com
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12413
• 发表日期: 2022
• 页码: 429-449
• 关键词: pass-through; POWER

摘要

Subsidies to consumers may cause firms to charge higher prices, which offsets consumer benefits from subsidies. We study a subsidy program design that mitigates such price increases by making products' eligibility for a subsidy dependent on firms' commitment to price ceilings. To quantify the importance of such competition for eligibility, we develop a structural model and an estimation procedure that accommodate binding pricing constraints. We find that competition for eligibility mitigates the price increases arising from the subsidy and even leads to a reduction in prices for some products. It improves consumer and total surpluses while limiting government subsidy payments.