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http://ssrn.com/abstract=471001
 
 

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Remedies for Price Overcharges: The Deadweight Loss of Coupons and Discounts


A. Mitchell Polinsky


Stanford Law School; National Bureau of Economic Research (NBER)

Daniel L. Rubinfeld


University of California at Berkeley - School of Law; National Bureau of Economic Research (NBER); NYU Law School

November 2003

Stanford Law and Economics Olin Working Paper No. 271

Abstract:     
This article evaluates two different remedies for consumers who have been injured by a price overcharge on the sale of a good. Under a coupon remedy, injured consumers are awarded coupons that can be used for a limited period of time to purchase the good at a price below that which prevails after the overcharge has been eliminated, that is, below the competitive price. Under a discount remedy, any consumer, without proof of injury, may purchase the good for a limited period of time at a price that is set below the competitive price. Both remedies generally cause consumers to buy an excessive amount of the good during the remedy period. Under the coupon remedy only a subset of consumers are affected in this way (those holding a relatively high number of coupons), while under the discount remedy all consumers are affected. We show nonetheless that the resulting deadweight loss could be lower under the discount remedy. We also consider how the deadweight loss changes when the length of the remedy period is increased - by extending the expiration date for the use of coupons or by employing a lower discount for a longer period of time. The deadweight loss may or may not decline under the coupon remedy, though it does decline under the discount remedy. In neither case, however, does it go to zero in the limit.

Keywords: Price fixing, antitrust remedies, coupons, discounts, deadweight loss

Number of Pages in PDF File: 30

Keywords: price fixing, antitrust remedies, coupons, discounts, deadweight loss

JEL Classification: D18, D42, K21, L12, L41

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Date posted: December 5, 2003  

Suggested Citation

Polinsky, A. Mitchell and Rubinfeld, Daniel L., Remedies for Price Overcharges: The Deadweight Loss of Coupons and Discounts (November 2003). Stanford Law and Economics Olin Working Paper No. 271. Available at SSRN: http://ssrn.com/abstract=471001 or http://dx.doi.org/10.2139/ssrn.471001

Contact Information

A. Mitchell Polinsky (Contact Author)
Stanford Law School ( email )
559 Nathan Abbott Way
Stanford, CA 94305-8610
United States
650-723-0886 (Phone)
650-723-3557 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Daniel L. Rubinfeld
University of California at Berkeley - School of Law ( email )
215 Boalt Hall
Berkeley, CA 94720-7200
United States
(510) 642-1959 (Phone)
(510) 642-3767 (Fax)
HOME PAGE: http://www.law.berkeley.edu/faculty/rubinfeldd
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
NYU Law School ( email )
44 West Fourth Street, Suite 9-53
New York, NY 10012-1126
United States
(212) 992 8834 (Phone)
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