426_natgas - What Were the Consequences of Natural Gas...

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What Were the Consequences of Natural Gas Wellhead Regulation? z Price ceilings were imposed on interstate trades of natural gas from 1954-1989. z Questions: 1) How large were the welfare losses? 2) Why did the price ceilings impose costs even after they were lifted in 1989? 3) How were these costs distributed geographically? z Source paper: “The Allocative Costs of Price Ceilings”, by Lucas Davis and Lutz Kilian, 2009
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If Gas Follows the Highest Price…
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Where Does It Go?
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Recall, there’s reason to believe that natural gas field production is relatively competitive…
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The “Textbook” Deadweight Loss Figure “The Allocative Costs of Price Ceilings”, by Lucas Davis and Lutz Kilian, 2009
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the Textbook Figure? z z 13,000+ seats at Reed z Suppose 20,000 people willing to pay $30 (approx. ticket price) z Suppose 1,000 wealthy former students don’t get tickets; 1000 apathetic two-percenters get tickets (initially) z What could happen to increase surplus? z
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426_natgas - What Were the Consequences of Natural Gas...

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