It has long been argued that price controls can create "shortages." In perfectly competitive markets, this proposition is almost self-evident. If price is held below the equilibrium level, firms will continually supply less than consumers demand. On the other hand, under monopolistic conditions, controls could theoretically improve welfare and increase output. A monopolistic firm in equilibrium charges a price above marginal cost. If a ceiling price is imposed which is below equilibrium but at or above the point where demand intersects marginal cost, monopoly power is nullified (or reduced) and consumers benefit through increased output at a lower price. In other words, the textbook models suggest that monopolists could be regulated to behave like perfect competitors. The purpose of this note is to demonstrate the inadequacies of these simple approaches and to add to the analysis of economic "shortages." Normally, economists think of a shortage as a gap between supply and demand where consumers are unable to buy as much as they desire at the quoted price. However, in imperfect markets, the concept of a shortage can be expanded. In the real world, suppliers expect that orders will arrive in a random, erratic fashion. In order to increase demand, suppliers may attempt to establish reputations for reliability of prompt delivery. To do so, they must maintain sufficient inventories to meet sudden peaks in orders. Such inventory maintenance, which represents a service to their customers because it reduces the necessity for them to maintain inventories or wait for delivery, is costly. It is easy to cite examples in which enterprises subject to price ceilings cut back on incidental services in order to raise effective prices.' To the extent that such service reductions are feasible, they represent a partial avoidance of price ceilings. In the same way, firms can avoid part of the effects of controls by reducing their delivery reliability, thus shifting the costs of inventory maintenance to consumers, who must either maintain (or expand) their own inventories or otherwise deal with delays in delivery.2 This analysis suggests that, during a period of price controls, sporadic "shortages" can be expected to develop even in monopolistic markets. These shortages reflect an increased lack of synchronization between orders and delivery rather than a chronic gap between demand and supply. The