Is the Price Right? The Role of Economic Trade-Offs in Explaining Reactions to Price Surges

Public authorities often introduce price controls following price surges, potentially causing inefficiencies and exacerbating shortages. A survey experiment with 7,612 Canadian and U.S. respondents shows that unregulated price surges raise moral objections and widespread disapproval. However, acceptance increases and demand for regulation declines when participants are prompted to consider economic trade-offs between controlled and unregulated prices, whereby incentives from higher prices lead to additional supply and enhance access to goods. Moreover, highlighting these trade-offs reduces polarization in moral judgments between supporters and opponents of unregulated pricing. Textual analysis of responses to open-ended questions provides further insights into our findings, and an incentivized donation task demonstrates consistency between stated preferences and real-stakes behavior. Although economic trade-offs do influence public support for price control policies, the evidence indicates that even when the potential gains in economic efficiency from unregulated prices are explicit, a significant divide persists between the utilitarian views that standard economic thinking implies and the nonutilitarian values held by the general population. This paper was accepted by Dorothea Kübler, behavioral economics and decision analysis. Funding: This work was supported by Johns Hopkins “Catalyst Award” and Business of Health Initiative (HBHI) and the Sandra Rotman Centre for Health Sector Strategy at the University of Toronto. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.04555 .

• 저널Management Science · 72(3) · 1814–1834
• 토픽Market Dynamics and Volatility · Economics and Econometrics
• DOI10.1287/mnsc.2024.04555
• 저자Julio Elías, Nicola Lacetera, Mario Macis