Working Paper: NBER ID: w29963
Authors: Julio J. Elias; Nicola Lacetera; Mario Macis
Abstract: Public authorities often introduce price controls in response to price surges, potentially causing inefficiencies and shortages. In a survey experiment with 7,612 Canadian and US respondents, we find that unregulated price increases cause general disapproval and strong moral reactions. However, acceptance is higher, and demand for regulation lower, when potential economic tradeoffs between controlled and unregulated prices are salient, and if the incentives resulting from price surges ultimately enhance access to goods. Highlighting tradeoffs also reduces the polarization of moral reactions between supporters and opponents of unregulated pricing. Text analysis of open-ended answers further supports our findings, and a donation experiment shows consistency between stated and revealed preferences.
Keywords: price surges; economic tradeoffs; price regulation; moral reactions
JEL Codes: C83; C91; D63; D91; I11; L50; Z1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Economic tradeoffs (F11) | Preferences for price regulation (L51) |
| Unregulated price increases (D49) | Moral reactions (A13) |
| Salient economic tradeoffs (F11) | Acceptance of unregulated pricing (D49) |
| Highlighting tradeoffs (F12) | Polarization of moral reactions (A13) |
| Moral acceptability of unregulated pricing (D40) | Acceptance of unregulated pricing (D49) |
| Moral reactions (A13) | Preferences for pricing regimes (P22) |