government to maintain supply even in the stores that it owned. The imported sugar required time to reach the country, and it could be sold at the rate fixed by the Supreme Court of Pakistan. Eventually, the government went for a review petition in the Supreme Court and obtained the withdrawal of the earlier decision of the apex court. The market equilibrium was achieved at 55 to 60 rupees per kilogram. Price ceilings that lead to higher prices There is a substantial body of research showing that under some circumstances price ceilings can, paradoxically, lead to higher prices. The leading explanation is that price ceilings serve to coordinate collusion among suppliers who would otherwise compete on price. More precisely, firms forming a cartel becomes profitable by enabling nominally competing firms to act like a monopoly, limiting quantities and raising prices. However, forming a cartel is difficult because it is necessary to agree on quantities and prices, and because each firm will have an incentive to "cheat" by lowering prices to sell more than it agreed to. Antitrust laws make collusion even more difficult because of legal sanctions. Having a third party, such as a regulator, announce and enforce a maximum price level can make it easier for the firms to agree on a price and to monitor pricing. The regulatory price can be viewed as a focal point, which is natural for both parties to charge. One research paper documenting the phenomenon is Knittel and Stangel, which found that in the 1980s United States, states that fixed an interest rate ceiling of 18 percent had firms charging a rate only slightly below the ceiling. States without an interest rate ceiling had interest rates that were significantly lower. The authors did not find any difference in costs that could explain the result. See also Black market General equilibrium Price floor Pricing Pricing science Pricing strategies References Further reading Price controls Pricing