225-231

• Κωνσταντάτος, Χρήστος

Standard microeconomic theory warns us that price controls create incentives for non compliance. In this paper we analyze the suppliers’ compliance with price ceilings decisions in a competitive sector, focusing on rent controls. We conclude that, first, forcing a non-complying land lord to simply return all payments in excess of the maximum allowed amount constitutes an implicit, nevertheless effective, real penalty. Second, instead of bringing the price back to its free market level, black market results to some implicitly defined ceiling, above the legalone. Third, as the gap between the ceiling and the free market price increases, the efficiency of fixed fines relative to that of proportional fines is reduced.

• Economics and Business
• Computer and information sciences

• Microeconomics
• Statistics

price ceiling, compliance, demand elasticity, penalty schemes

Περιέχει διάγραμμα, σημειώσεις και βιβλιογραφία, I wish to express my intellectual debt to my professor, Gilles Grenier, who introduced me to the idea of endogenous compliance, as well as my gratitude to an anonymous referee of this journal for their particularly detailed and valuable comments. The responsibility for any remaining errors is entirely mine., JEL Classification: D40, L50, K42