Worst-case deadweight loss: Theory and disturbing real-world implications

Worst-case deadweight loss: Theory and disturbing real-world implications

The deadweight loss from a monopolist’s not producing at all can be much greater than from charging too high a price. The column argues that the potential for this sort of deadweight loss is greatest when the market demand curve has a particular (Zipf) shape. Calibrations based on the world distribution of income generate this shape, with disturbing consequences for potential deadweight loss in global markets.

Michael Kremer, Christopher Snyder, Albert Chen

Vox EU

March 26, 2019

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By |2019-04-01T12:50:23-08:00January 1st, 2018|Efficiency/Growth, Intellectual Property, Reference|