The Consumer Impact of Alternative Allocation Plans: The Case of Gasoline

This paper assesses the potential impact of rationing, “lifeline,” rationing with resale and tax-rebate approaches to extra-market allocation from the consumer's perspective. Basic microeconomic tools are used to demonstrate that the rationing with resale and tax-rebate plans have similar effects and that all consumers would prefer those policies to lifeline allocation. Conventional rationing is shown to benefit households consuming intermediate quantities of an allocated good while rationing with resale and tax-rebate programs provide large and small users with higher levels of satisfaction. These propositions are empirically confirmed for the case of gasoline. Quantitative results suggest that simple rationing and lifeline plans calculated to reduce aggregate gasoline consumption by 10 percent would have severe impact on high income consumers. Alternative policies would broaden the burden of conservation and cause income redistribution toward low income consumers.