• There are obvious examples where the consumer surplus can be very small while the
allocation is efficient (example: perfect price discrimination of a monopolist).
• Using consumer surplus instead of total surplus might reflect a specific social welfare
function, namely, one in which more emphasis is put on “consumers” than on “firms”
• This is not, however, good economics:
Firms are owned by somebody – namely, consumers
Reducing firm profits thus makes (some) consumers worse of (because they get
less dividend and therefore can consume less)
Consumers can consume a product (e.g. broadband) and suffer from too high
prices and at the same time benefit from it (if they hold shares of DTAG)
• Thus, distributional effects of favoring consumer surplus are not clear as such
(although one suspects that those holding shares are those with above average
wealth – i.e. favoring consumer surplus might favor low wealth consumers in the end).
• Some economists argue that in most applications it does not make a big difference
whether to use consumer or producer surplus, since usually both move in the same
direction in practice and thus yield the same policy recommendation.