Nadia Lucas: How do emergency price controls affect consumers and producers? Theory and Evidence from U.S. Natural Disasters (joint with Ishan Nath, Johanna Rayl, and Becky Scurlock)
This paper studies policies that ban firms from raising prices, or “price gouging”, on critical goods during public emergencies. While such laws exist in 37 US states, little evidence weighs their potential benefits — equity and the regulation of disaster-induced monopoly power — against their potential costs — exacerbating shortages and encouraging hoarding. We show in a stylized graphical framework that this tradeoff hinges on the slope of the supply curve and the amount of disaster-induced retailer market power. We empirically examine these features of the US retail market for disaster supplies, as well as the extent of price gouging. Demand for supplies spikes sharply in the first weeks of natural disasters. While average price increases are small to none, a minority of stores engage in large price hikes. We provide evidence that only a subset of these violations are enforced. Meanwhile, shortages increase in probability during early disaster weeks. On the supply side, the same set of disasters lead to small increases in transportation costs via trucking, and no increases in wholesale prices.
Ashton Pallottini: EV or not EV: How Consumers Value Actual Environmental Impacts Versus Social Status
Consumers have long purchased goods which masquerade as eco-friendly but actually have little environmental impact. This can be driven by the presence of (i) social utility and (ii) information frictions. Specifically, a consumer’s network may incorrectly perceive a good as eco-friendly. If a consumer cares about their network’s perception of their eco-friendliness, then the network’s incorrect perceptions may cause even a perfectly-informed consumer to purchase the fake “eco-friendly” good. We present a simple model of consumer choice in which consumers care about eco-friendliness due to both private and social concerns. We show that under imperfect information an equilibrium may arise in which many consumers misperceive eco-friendliness and purchase ineffective goods. We focus in more narrowly on misperceptions around USA electric vehicles and propose an exercise in demand estimation which tests whether consumers more greatly value actual impacts or their networks’ perceptions of impacts. We further propose to test whether targeted information treatments are a cost-effective means to shift towards a more-informed equilibrium.
Yixin Sun: Learning About Preferences for Clean Air
Despite the enormous health costs of air pollution, willingness-to-pay (WTP) for clean air in highly polluted developing contexts remains very low. We posit that one significant and understudied reason is that clean air is an experience good, whose value is revealed only after consumption. This dynamic characterization implies that policymakers cannot use observed WTP as an invariant policy input. We are launching a pilot in Jakarta, Indonesia that will leverage air purifier rentals to provide a clean air experience. This experience intervention will be compared against against a traditional information treatment. Our contribution will be (1) a dynamic characterization of WTP for clean air and (2) the deployment of a novel type of experienced-based information campaign, which we hypothesize would provide a more salient treatment than traditional mediums.