Under binding ceilings, cost-minimizing suppliers drive allocations to corners rather than Harberger or random benchmarks, producing larger losses and discontinuous welfare jumps.

Professor of economics at George Mason University and Bartley J

We show that equilibrium generically occurs at neither the Harberger nor Glaeser-Luttmer benchmark. Cost-minimizing suppliers drive allocations to vertices, not interiors. Corners are not an assumption but an outcome about what cost-minimizing suppliers choose. The correct benchmark is corners, not random, and corners generate qualitatively different welfare properties: losses far larger than either efficient or random distributions, and discontinuous jumps from small parameter perturbations.