Buyers and sellers will seek to maximize their utilities by taking advantage of any technicalities overlooked by the price regulations—or, in extreme cases, by engaging in gray-market or black-market exchanges. For instance, sellers may offer only scrawny cows or cows of inferior breeds, which are accepted willingly by desperate buyers. Some goods may be sold only in diluted form, or without customary warranties; where substitute goods are available, buyers may purchase them even though their services are inferior to those offered by the original products. As the shortage intensifies, both buyers and sellers will tend to turn increasingly to the black (i. e., illegal) market. There they will realize mutually beneficial exchanges, but at prices that may far exceed even free-market prices because of the additional legal risks incurred by sellers. Because it must be surreptitious, black-market trading is especially subject to violence and fraud. Furthermore, it provides a stream of revenue to criminal networks, which in turn may be redirected toward more violent and aggressive activities, even if price controls are lifted.      Next page
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