Price Caps in Multiprice Markets
Many consumer markets feature a multidimensional price. A policy maker—a legislator, a regulator, or a court—concerned about the level of one price dimension may decide to cap this price. How will such a price cap affect other price dimensions? Will the overall effect be good or bad for consumers? For social welfare? Price caps can be beneficial when sellers set prices in response to consumers’ misperception. The scope for welfare-enhancing regulation depends on the type (and direction) of the underlying misperception and on market structure.
"Price Caps in Multiprice Markets,"
Journal of Legal Studies: Vol. 44
, Article 7.
Available at: https://chicagounbound.uchicago.edu/jls/vol44/iss3/7