Recent U.S. Price Controls

How Does Business Respond?

by Frank Camm, Charles E. Phelps, Peter Stan

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Price controls have been common in U.S. economic history since World War II; since then, every president except one has employed some form of price control or guideline. This report summarizes research conducted on the consequences of the actual type of price controls used recently. The structure of these controls is very different from that usually assumed by economists, and their consequences are markedly different as well. This report shows how these controls are structured, gives some visual analytical tools to help understand their effects, and provides evidence from recent controls in the petroleum refining sector to show their consequences. Further study is needed to understand the consequences of such controls in other industries; the response of businesses to such controls is different in important ways for firms with different types of production technologies. An agenda for future research shows the most profitable next steps toward understanding this form of price control.

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