Abstract
Welfare consequences of retail price reform in a Soviet-type economy are investigated using a queue-rationing model. It is shown that to make every consumer better off market clearing pricing may have to be accompanied by a differential monetary compensation. Such Pareto-improving compensation schemes are virtually impossible to implement given the effects of illegal rents generated by the existing price system and the lack of correlation between these rents and legal incomes. In addition, some other problems with market price reform in a Soviet-type economy are pointed out.
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