Factor supply interruption, welfare loss and shortage management

Chi Keung WOO, Kenneth W. K. LO

Research output: Contribution to journalArticlespeer-review

3 Citations (Scopus)

Abstract

Factor supply shortage is a common problem faced by a firm. Solutions for allocating the limited supply include rationing, interruption and pricing. While previous research has examined the welfare losses generated by each solution, there is little evidence on their relative magnitudes within a common framework. The objective of this paper is to specify a model of firm behaviour under service interruption to estimate the welfare loss of service interruption. The same model is used to estimate the loss due to a price increase intended to resolve a supply shortage. Using water consumption data collected for Hong Kong, we find that relative to pricing, service interruption is inefficient for water shortage management. Copyright © 1993 Published by Elsevier B.V.

Original languageEnglish
Pages (from-to)339-351
JournalResource and Energy Economics
Volume15
Issue number4
DOIs
Publication statusPublished - Dec 1993

Citation

Woo, C.-K., & Lo, K. W. K. (1993). Factor supply interruption, welfare loss and shortage management. Resource and Energy Economics, 15(4), 339-351. doi: 10.1016/0928-7655(93)90013-K

Keywords

  • Factor supply shortage
  • Service interruption
  • Welfare loss
  • Shortage management

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