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Rationing

Definition

Rationing is the controlled distribution of scarce resources, goods, or services, or an artificial restriction of demand. Rationing controls the size of the ration, which is one's allowed portion of the resources being distributed on a particular day or at a particular time. There are many forms of rationing, and in western civilization people experience some of them in daily life without realizing it.

What is 'Rationing'

Rationing is the artificial restriction of raw materials, goods or services. Rationing commonly occurs when governments fear a shortage and want to make sure people have access to necessities, such as after a natural disaster or during a war. Governments can also impose rationing in the face of failed policies such as central planning, or may be forced to use rationing as a result of shortages.

Explaining 'Rationing'

For example, during World War II, the U.S. government imposed rationing on the country so that sufficient materials and production capabilities would be available to the military. It did not matter how much of an item an individual or family wanted or could afford to purchase; people were only allowed to purchase a limited amount specified by the government and controlled by ration coupons. Items including tires, gasoline, sugar, meat, butter and many others were subject to rationing.


Rationing can lead to the creation of black markets for the rationed goods. Black markets allow individuals to use their allotment of a rationed good that they don't need to obtain more of a rationed good that they do need.


Further Reading


Costly monitoring, financial intermediation, and equilibrium credit rationing
www.sciencedirect.com [PDF]
This paper establishes a link between equilibrium credit rationing and financial intermediation, in a model with asymmetrically informed lenders and borrowers, costly monitoring, and investment project indivisibilities. Intermediation is shown to dominate …

Firm Heterogeneity, Internal Finance, andCredit Rationing'Firm Heterogeneity, Internal Finance, andCredit Rationing'
academic.oup.com [PDF]
This paper establishes a link between equilibrium credit rationing and financial intermediation, in a model with asymmetrically informed lenders and borrowers, costly monitoring, and investment project indivisibilities. Intermediation is shown to dominate …

Do firms get the financing they want? Measuring credit rationing experienced by small businesses in the USDo firms get the financing they want? Measuring credit rationing experienced by small businesses in the US
link.springer.com [PDF]
This paper establishes a link between equilibrium credit rationing and financial intermediation, in a model with asymmetrically informed lenders and borrowers, costly monitoring, and investment project indivisibilities. Intermediation is shown to dominate …

Small firm finance, credit rationing, and the impact of SBA‐guaranteed lending on local economic growthSmall firm finance, credit rationing, and the impact of SBA‐guaranteed lending on local economic growth
onlinelibrary.wiley.com [PDF]
This paper establishes a link between equilibrium credit rationing and financial intermediation, in a model with asymmetrically informed lenders and borrowers, costly monitoring, and investment project indivisibilities. Intermediation is shown to dominate …

CREDIT DEMAND AND CREDIT RATIONING IN THE INFORMAL FINANCIAL SECTOR IN UGANDACREDIT DEMAND AND CREDIT RATIONING IN THE INFORMAL FINANCIAL SECTOR IN UGANDA
onlinelibrary.wiley.com [PDF]
This paper establishes a link between equilibrium credit rationing and financial intermediation, in a model with asymmetrically informed lenders and borrowers, costly monitoring, and investment project indivisibilities. Intermediation is shown to dominate …

Are business startups debt-rationed?Are business startups debt-rationed?
academic.oup.com [PDF]
This paper establishes a link between equilibrium credit rationing and financial intermediation, in a model with asymmetrically informed lenders and borrowers, costly monitoring, and investment project indivisibilities. Intermediation is shown to dominate …

Credit rationing in financial distress: Croatia SMEs' finance approachCredit rationing in financial distress: Croatia SMEs' finance approach
www.emerald.com [PDF]
This paper establishes a link between equilibrium credit rationing and financial intermediation, in a model with asymmetrically informed lenders and borrowers, costly monitoring, and investment project indivisibilities. Intermediation is shown to dominate …

Financing constraints, credit, rationing, and financing obstacles: Evidence from firm level data in South Eastern EuropeFinancing constraints, credit, rationing, and financing obstacles: Evidence from firm level data in South Eastern Europe
link.springer.com [PDF]
This paper establishes a link between equilibrium credit rationing and financial intermediation, in a model with asymmetrically informed lenders and borrowers, costly monitoring, and investment project indivisibilities. Intermediation is shown to dominate …

A Post Keynesian theory of credit rationingA Post Keynesian theory of credit rationing
www.tandfonline.com [PDF]
This paper establishes a link between equilibrium credit rationing and financial intermediation, in a model with asymmetrically informed lenders and borrowers, costly monitoring, and investment project indivisibilities. Intermediation is shown to dominate …



Q&A About Rationing


What is rationing?

Rationing is the artificial restriction of raw materials, goods or services.

What are some examples of when governments may use rationing?

During natural disasters and wars.

Are there any negative effects from using too much of a good or service during times of plenty while imposing restrictions on how much you can get during times of shortage?

Yes, this could lead to hoarding which could cause even more problems for those who really need certain items because supplies will run out faster than anticipated due to hoarding behavior."

Who can impose rationing?

Governments can impose rationing.

When does a government not have to use rationing?

A government doesn't have to use rationing if it has failed policies such as central planning or if there are no shortages.

Why would a government want to restrict raw materials, goods and services?

Governments fear shortages.

How do people react when they don't get what they want or need in a situation where there is an abundance of something but limited resources for everyone to access that thing?

People tend to be upset and try to find ways around the restrictions imposed by the government. This often leads to black markets being created where people trade their rations for other things that they need more than what they were allotted by the government.