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This past October, articles by ASE professors Schinkel and Tuinstra and their co-authors in ESB and FD warned that the Dutch government’s approach to implementing a price cap would drive prices up.

Since then, the debate and policy continues to evolve.

A price cap that won’t disrupt market forces

The idea of an indexed lump sum amount, something Schinkel suggested in an interview in the newspaper NRC, was proposed in the Dutch Parliament. Together with professor Marco Haan (University of Groningen), he elaborated on the details of this approach in a recently published second ESB article (in Dutch). In this article, the economists also propose an alternative price ceiling system that is based on the stipulated prices and amounts as well, but with no detrimental effect on market forces.

The new proposal put forward by Schinkel and Haan gives households indexed discounts so they continue to have an incentive to compare prices. Schinkel briefly explains both ideas in a 14 November EenVandaag broadcast (starting at 2:20). An op-ed piece was published in de Volkskrant newspaper on 7 December.