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Seller reputation and price gouging: Evidence from the COVID‐19 pandemic

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  • Luís Cabral
  • Lei Xu

Abstract

From mid‐January to March 2020, 3M masks sold on Amazon by third party sellers were priced 2.4 times higher than Amazon's 2019 price. However, this price increase was not uniform across sellers. We estimate that when Amazon is stocked out (one of our measures of scarcity) new (entrant) sellers increase price by 178%, whereas the continuing sellers' increase is limited to 56.7%. This is consistent with the idea that seller reputation limits the extent of profitable price gouging. Similar results are obtained for Purell hand sanitizer and for other measures of scarcity. We also explore policy implications of our results.

Suggested Citation

  • Luís Cabral & Lei Xu, 2021. "Seller reputation and price gouging: Evidence from the COVID‐19 pandemic," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 867-879, July.
    • Handle: RePEc:bla:ecinqu:v:59:y:2021:i:3:p:867-879
    DOI: 10.1111/ecin.12993
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    References listed on IDEAS

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    Cited by:

    1. Patrick W. McLaughlin & Alexander Stevens & Shawn Arita & Xiao Dong, 2023. "Stocking up and stocking out: Food retail stock‐outs, consumer demand, and prices during the COVID‐19 pandemic in 2020," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(3), pages 1618-1633, September.
    2. Federico Etro, 2023. "Hybrid Marketplaces with Free Entry of Sellers," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(2), pages 119-148, March.
    3. Almut Balleer & Sebastian Link & Manuel Menkhoff & Peter Zorn, 2024. "Demand or Supply? Price Adjustment Heterogeneity during the COVID-19 Pandemic," International Journal of Central Banking, International Journal of Central Banking, vol. 20(1), pages 93-157, February.
    4. Erwan Gautier & Christoph Grosse Steffen & Magali Marx & Paul Vertier, 2023. "Decomposing the Inflation Response to Weather-Related Disasters," Working papers 935, Banque de France.
    5. Fabrizio Ciotti & Lars Hornuf & Eliza Stenzhorn, 2021. "Lock-In Effects in Online Labor Markets," CESifo Working Paper Series 9379, CESifo.
    6. Valentiny, Pál, 2023. "Koronavírus-járvány és versenyszabályozás [Competition policy and the coronavirus pandemic]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 398-431.

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