2012a). Price controls, non-price quality competition, and stable outcomes. Mimeo, Stanford Graduate School of Business

We investigate how price ceilings and floors affect outomces in continuous time, double auction markets with discrete goods and multiple qualities. Since competitive equilibria need not exist in markets with price contols, we investigated the nature of non-price competition and how markets might evolve in its presence. We develop a quality competition model based on matching theory. Equilibria always exist in such price-constrained markets; moreover, they naturally correspond to competitive equilib-ria when competitive equilibria exist. Additionally, we characterize the set of equilibria in the presence of price restrictions. In a series of experiments, we find that market outcomes closely conform to the predictions of the model. In particular, price controls induce non-price competition between agents both in theory and in the experimen-tal environment; market behaviors result in allocations close to the predictions of the model