IDEAS home Printed from https://ideas.repec.org/a/eee/irlaec/v37y2014icp100-107.html
   My bibliography  Save this article

Can prohibitions on “price gouging” reduce deadweight losses?

Author

Listed:
  • Fleck, Robert K.

Abstract

The vast literature on price controls says little about the way laws against “price gouging” differ from generic price ceilings, yet there is an important difference. By creating the foreseeable possibility (not certainty) of a shortage, a prohibition on price gouging may cause rational consumers to increase consumption. This has particularly interesting implications for markets with external benefits – expectations about policy-induced shortages may increase socially beneficial preparedness for times of acute scarcity (e.g., obtaining vaccinations prior to epidemics, keeping goods on hand in preparation for natural disasters). Thus, under some conditions, laws against price gouging may increase total surplus.

Suggested Citation

  • Fleck, Robert K., 2014. "Can prohibitions on “price gouging” reduce deadweight losses?," International Review of Law and Economics, Elsevier, vol. 37(C), pages 100-107.
    • Handle: RePEc:eee:irlaec:v:37:y:2014:i:c:p:100-107
    DOI: 10.1016/j.irle.2013.05.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0144818813000367
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.irle.2013.05.001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Barzel, Yoram, 1974. "A Theory of Rationing by Waiting," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 73-95, April.
    2. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    3. Drazen, Allan, 1986. "Optimal Minimum Wage Legislation," Economic Journal, Royal Economic Society, vol. 96(383), pages 774-784, September.
    4. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, July.
    5. Chang Yang-Ming & Sanders Shane D., 2010. "The Welfare Implications of Rent Control: A Rent-Seeking Contest Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-20, October.
    6. Cheung, Steven N S, 1974. "A Theory of Price Control," Journal of Law and Economics, University of Chicago Press, vol. 17(1), pages 53-71, April.
    7. Edward L. Glaeser & Erzo F. P. Luttmer, 2003. "The Misallocation of Housing Under Rent Control," American Economic Review, American Economic Association, vol. 93(4), pages 1027-1046, September.
    8. Lee, Dwight R, 1978. "Price Controls, Binding Constraints, and Intertemporal Economic Decision Making," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 293-301, April.
    9. Lang, Kevin, 1987. "Pareto Improving Minimum Wage Laws," Economic Inquiry, Western Economic Association International, vol. 25(1), pages 145-158, January.
    10. Deacon, Robert T & Sonstelie, Jon, 1985. "Rationing by Waiting and the Value of Time: Results from a Natural Experiment," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 627-647, August.
    11. Richard Arnott, 1995. "Time for Revisionism on Rent Control?," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 99-120, Winter.
    12. Suen, Wing, 1989. "Rationing and Rent Dissipation in the Presence of Heterogeneous Individuals," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1384-1394, December.
    13. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
    14. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    15. Deacon, Robert T & Sonstelie, Jon, 1991. "Price Controls and Rent Dissipation with Endogenous Transaction Costs," American Economic Review, American Economic Association, vol. 81(5), pages 1361-1373, December.
    16. de Janvry, Alain & Sadoulet, Elisabeth & Villas-Boas, Sofia, 2010. "Short on shots: Are calls for cooperative restraint effective in managing a flu vaccines shortage?," Journal of Economic Behavior & Organization, Elsevier, vol. 76(2), pages 209-224, November.
    17. Becker, Gary S, 1976. "Toward a More General Theory of Regulation: Comment," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 245-248, August.
    18. Deacon, Robert T & Sonstelie, Jon, 1989. "The Welfare Costs of Rationing by Waiting," Economic Inquiry, Western Economic Association International, vol. 27(2), pages 179-196, April.
    19. Brito, Dagobert L. & Sheshinski, Eytan & Intriligator, Michael D., 1991. "Externalities and compulsary vaccinations," Journal of Public Economics, Elsevier, vol. 45(1), pages 69-90, June.
    20. H. E. Frech III & William C. Lee, 1987. "The Welfare Cost of Rationing-By-Queuing Across Markets: Theory and Estimates from the U. S. Gasoline Crises," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(1), pages 97-108.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edward L. Glaeser, 1996. "The Social Costs of Rent Control Revisted," Harvard Institute of Economic Research Working Papers 1747, Harvard - Institute of Economic Research.
    2. Lui, Hon-Kwong & Suen, Wing, 2011. "The effects of public housing on internal mobility in Hong Kong," Journal of Housing Economics, Elsevier, vol. 20(1), pages 15-29, March.
    3. Luttmer Erzo F.P., 2007. "Does the Minimum Wage Cause Inefficient Rationing?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-42, October.
    4. Edward L. Glaeser & Erzo F. P. Luttmer, 2003. "The Misallocation of Housing Under Rent Control," American Economic Review, American Economic Association, vol. 93(4), pages 1027-1046, September.
    5. Chang Yang-Ming & Sanders Shane D., 2010. "The Welfare Implications of Rent Control: A Rent-Seeking Contest Approach," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-20, October.
    6. Van Ommeren, Jos N. & Van der Vlist, Arno J., 2016. "Households' willingness to pay for public housing," Journal of Urban Economics, Elsevier, vol. 92(C), pages 91-105.
    7. LaPlue, Lawrence D., 2022. "Environmental consequences of natural gas wellhead pricing deregulation," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).
    8. Deltas, George, 2007. "Can a minimum wage increase employment and reduce prices in a neoclassical perfect information economy?," Journal of Mathematical Economics, Elsevier, vol. 43(6), pages 657-674, August.
    9. Brennan Platt, 2009. "Queue-rationed equilibria with fixed costs of waiting," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 40(2), pages 247-274, August.
    10. Gerritsen, Aart, 2017. "Equity and efficiency in rationed labor markets," Journal of Public Economics, Elsevier, vol. 153(C), pages 56-68.
    11. Rik Chakraborti & Gavin Roberts, 2023. "How price-gouging regulation undermined COVID-19 mitigation: county-level evidence of unintended consequences," Public Choice, Springer, vol. 196(1), pages 51-83, July.
    12. Chen, Ruoyu & Jiang, Hanchen & Quintero, Luis E., 2023. "Measuring the value of rent stabilization and understanding its implications for racial inequality: Evidence from New York City," Regional Science and Urban Economics, Elsevier, vol. 103(C).
    13. Joan Monràs & José Garcia Montalvo, 2021. "The effect of second generation rent controls: New evidence from Catalonia," Economics Working Papers 1836, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2022.
    14. Lee, David & Saez, Emmanuel, 2012. "Optimal minimum wage policy in competitive labor markets," Journal of Public Economics, Elsevier, vol. 96(9-10), pages 739-749.
    15. Basu, Kaushik, 2005. "Labor Laws and Labor Welfare in the Context of the Indian Experience," Working Papers 05-17, Cornell University, Center for Analytic Economics.
    16. David S. Lee & Emmanuel Saez, 2008. "Optimal Minimum Wage Policy in Competitive Labor Markets," Working Papers 1105, Princeton University, Department of Economics, Industrial Relations Section..
    17. Besley, Timothy & Hall, John & Preston, Ian, 1999. "The demand for private health insurance: do waiting lists matter?," Journal of Public Economics, Elsevier, vol. 72(2), pages 155-181, May.
    18. Edward L. Glaeser, 2012. "Urban Public Finance," NBER Working Papers 18244, National Bureau of Economic Research, Inc.
    19. George Economides & Thomas Moutos, 2014. "Minimum Wages as a Redistributive Device in the Long Run," CESifo Working Paper Series 5052, CESifo.
    20. Maria Arbatskaya & Kaushik Mukhopadhaya & Eric Rasmusen, 2001. "The Parking Lot Problem," CIRJE F-Series CIRJE-F-119, CIRJE, Faculty of Economics, University of Tokyo.
      • Maria Arbatskaya & Kaushik Mukhopadhaya & Eric Rasmusen, 2007. "The Parking Lot Problem," Working Papers 2007-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

    More about this item

    Keywords

    Price gouging; Price controls; Price ceilings;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:37:y:2014:i:c:p:100-107. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/irle .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.