The welfare effect of a consumer subsidy with price ceilings: the case of Chinese cell phones
研究中国手机市场中，通过价格上限约束企业定价的消费者补贴计划如何缓解补贴导致的价格上涨，并提升消费者和总福利。
Abstract 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.