Fan, Ying. <br/><br/>
The Welfare Effect of a Consumer Subsidy with Price Ceilings:  The Case of Chinese Cell Phones / 
Ying Fan, Ge Zhang. 
 - Cambridge, Mass.  National Bureau of Economic Research  2021. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w28659 .
 - Working Paper Series (National Bureau of Economic Research)  no. w28659. .
<br/><br/> April 2021. 
<br/><br/> Subsidies to consumers may cause firms to charge higher prices, which offsets consumer benefits from subsidies. We study a subsidy program design that mitigates such price increases by making products' eligibility for a subsidy dependent on firms' commitment to price ceilings. To quantify the importance of such competition for eligibility, we develop a structural model and an estimation procedure that accommodate binding pricing constraints. We find that competition for eligibility mitigates the price increases arising from the subsidy and even leads to a reduction in prices for some products. It improves consumer and total surpluses while limiting government subsidy payments. 
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