Nadia Lucas, Ishan Nath, Johanna Rayl, and Rebecca Scurlock
This paper studies the effects of laws that ban firms from raising prices on critical goods, or “price-gouging”, during public emergencies. We start by showing that existing state laws in the United States prior to 2019 were not enforced. To evaluate the effects of a hypothetical well-enforced policy, we exploit variation in national chain pricing strategies plausibly exogenous to variation in local circumstances. We show that raising prices is associated with greater sales and fewer stockouts, suggesting a positive supply elasticity. However, raising prices also appears to reduce purchases disproportionately by low-income consumers. Given this efficiency-equity tradeoff, the efficacy of the policy depends on the social welfare function.
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