IDEAS home Printed from https://ideas.repec.org/a/kap/jcopol/v44y2021i4d10.1007_s10603-021-09493-1.html
   My bibliography  Save this article

Learning to Hoard: The Effects of Preexisting and Surprise Price-Gouging Regulation During the COVID-19 Pandemic

Author

Listed:
  • R. Chakraborti

    (Christopher Newport University)

  • G. Roberts

    (Weber State University)

Abstract

Theory suggests anticipation of shortages stemming from price regulation can motivate households to stock up more and thereby aggravate the regulation-induced shortage. We test this theory on online shopping searches for two typically store-bought staples: hand sanitizer and toilet paper. Combining (i) interstate variation in type of price-gouging regulation—preexisting versus surprise versus none, (ii) their temporally staggered implementation, and (iii) the demand surges for hand sanitizer and toilet paper during the COVID-19 pandemic facilitates identifying the impacts of different price-gouging regulation on consumer searches. Our results are consistent with price-gouging regulation–driven anticipatory hoarding. Difference-in-differences estimates reveal that states with preexisting-regulation experience the largest increases in post-implementation search proportions for both products. Accounting for potential endogeneity of implementation using a nearest-neighbor matching strategy reveals states that make surprise announcements of new regulation during the pandemic also experience larger increases in post-activation hand sanitizer search proportions than states without any such policy, but smaller increases than what preexisting-law states experience. These results corroborate the theoretical predictions about consequences of regulation-induced anticipation of shortages and inform the current policy debate surrounding impacts of price-gouging laws. Fundamentally, our results indicate behavioural responses to policy evolve as experience reveals the effects of the policy, and this evolution might influence the welfare consequences of the policy.

Suggested Citation

  • R. Chakraborti & G. Roberts, 2021. "Learning to Hoard: The Effects of Preexisting and Surprise Price-Gouging Regulation During the COVID-19 Pandemic," Journal of Consumer Policy, Springer, vol. 44(4), pages 507-529, December.
    • Handle: RePEc:kap:jcopol:v:44:y:2021:i:4:d:10.1007_s10603-021-09493-1
    DOI: 10.1007/s10603-021-09493-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10603-021-09493-1
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10603-021-09493-1?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. Dreda Culpepper & Walter Block, 2008. "Price gouging in the Katrina aftermath: free markets at work," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 35(7), pages 512-520, June.
    3. Duflo, Esther & Glennerster, Rachel & Kremer, Michael, 2008. "Using Randomization in Development Economics Research: A Toolkit," Handbook of Development Economics, in: T. Paul Schultz & John A. Strauss (ed.), Handbook of Development Economics, edition 1, volume 4, chapter 61, pages 3895-3962, Elsevier.
    4. Abadie, Alberto & Imbens, Guido W., 2011. "Bias-Corrected Matching Estimators for Average Treatment Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(1), pages 1-11.
    5. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
    6. Zwolinski, Matt, 2008. "The Ethics of Price Gouging," Business Ethics Quarterly, Cambridge University Press, vol. 18(3), pages 347-378, July.
    7. Christopher Hansman & Harrison Hong & Áureo de Paula & Vishal Singh, 2020. "A Sticky-Price View of Hoarding," NBER Working Papers 27051, National Bureau of Economic Research, Inc.
    8. Lechner, Michael, 2011. "The Estimation of Causal Effects by Difference-in-Difference Methods," Foundations and Trends(R) in Econometrics, now publishers, vol. 4(3), pages 165-224, November.
    9. Rik Chakraborti & Gavin Roberts, 2020. "Anti-Gouging Laws, Shortages, and COVID-19: Insights from Consumer Searches," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 35(Winter 20), pages 1-20.
    10. 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.
    11. Weitzman, Martin L, 1991. "Price Distortion and Shortage Deformation, or What Happened to the Soap?," American Economic Review, American Economic Association, vol. 81(3), pages 401-414, June.
    12. Timothy K. M. Beatty & Gabriel E. Lade & Jay Shimshack, 2021. "Hurricanes and Gasoline Price Gouging," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(2), pages 347-374.
    13. Alberto Abadie & David Drukker & Jane Leber Herr & Guido W. Imbens, 2004. "Implementing matching estimators for average treatment effects in Stata," Stata Journal, StataCorp LP, vol. 4(3), pages 290-311, September.
    14. W. David Montgomery & Robert A. Baron & Mary K. Weisskopf, 2007. "Potential Effects Of Proposed Price Gouging Legislation On The Cost And Severity Of Gasoline Supply Interruptions," Journal of Competition Law and Economics, Oxford University Press, vol. 3(3), pages 357-397.
    15. Guido W. Imbens, 2004. "Nonparametric Estimation of Average Treatment Effects Under Exogeneity: A Review," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 4-29, February.
    16. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Olivia H. Tousignant & Sarah W. Hopkins & Abigail M. Stark & Gary D. Fireman, 2021. "Psychological Wellbeing, Worry, and Resilience-Based Coping during COVID-19 in Relation to Sleep Quality," IJERPH, MDPI, vol. 19(1), pages 1-15, December.
    2. 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.

    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. 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.
    2. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    3. Rik Chakraborti & Gavin Roberts, 2020. "Anti-Gouging Laws, Shortages, and COVID-19: Insights from Consumer Searches," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 35(Winter 20), pages 1-20.
    4. Grau, Nicolas & Hojman, Daniel & Mizala, Alejandra, 2018. "School closure and educational attainment: Evidence from a market-based system," Economics of Education Review, Elsevier, vol. 65(C), pages 1-17.
    5. Neelsen, Sven & Limwattananon, Supon & O'Donnell, Owen & van Doorslaer, Eddy, 2019. "Universal health coverage: A (social insurance) job half done?," World Development, Elsevier, vol. 113(C), pages 246-258.
    6. Jeon, Jin Q. & Lee, Cheolwoo & Nasser, Tareque & Via, M. Tony, 2015. "Multiple lead underwriter IPOs and firm visibility," Journal of Corporate Finance, Elsevier, vol. 32(C), pages 128-149.
    7. Abbott, Joshua K. & Klaiber, H. Allen, 2011. "The Value Of Water As An Urban Club Good: A Matching Approach To Hoa-Provided Lakes," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103781, Agricultural and Applied Economics Association.
    8. Sun, Shanxia & Delgado, Michael & Khanna, Neha, 2017. "Hybrid Vehicles and Household Driving Behavior: Implications for Miles Traveled and Gasoline Consumption," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258502, Agricultural and Applied Economics Association.
    9. Michael Lechner & Anthony Strittmatter, 2019. "Practical procedures to deal with common support problems in matching estimation," Econometric Reviews, Taylor & Francis Journals, vol. 38(2), pages 193-207, February.
    10. Jin, Hyun Joung & Cho, Sung Min, 2021. "Effects of cigarette price increase on fresh food expenditures of low-income South Korean households that spend relatively more on cigarettes," Health Policy, Elsevier, vol. 125(1), pages 75-82.
    11. Bas van der Klaauw & Sandra Vriend, 2015. "A Nonparametric Method for Predicting Survival Probabilities," Tinbergen Institute Discussion Papers 15-126/V, Tinbergen Institute.
    12. Galina Besstremyannaya, 2014. "Heterogeneous effect of coinsurance rate on healthcare costs: generalized finite mixtures and matching estimators," Discussion Papers 14-014, Stanford Institute for Economic Policy Research.
    13. Assaad Ghazouani & Wanjun Xia & Mehdi Ben Jebli & Umer Shahzad, 2020. "Exploring the Role of Carbon Taxation Policies on CO 2 Emissions: Contextual Evidence from Tax Implementation and Non-Implementation European Countries," Sustainability, MDPI, vol. 12(20), pages 1-16, October.
    14. Daly, Moira, 2015. "The long term returns of attempting self-employment with regular employment as a fall back option," Labour Economics, Elsevier, vol. 35(C), pages 26-52.
    15. Esaka, Taro, 2014. "Are consistent pegs really more prone to currency crises?," Journal of International Money and Finance, Elsevier, vol. 44(C), pages 136-163.
    16. Rumokoy, Lawren J. & Neupane, Suman & Chung, Richard Y. & Vithanage, Kulunu, 2019. "Underwriter network structure and political connections in the Chinese IPO market," Pacific-Basin Finance Journal, Elsevier, vol. 54(C), pages 199-214.
    17. Rocchi, B & Marino, M & Severini, S, 2018. "Does a farm household income problem still exist in the European Union?," 2018 Seventh AIEAA Conference, June 14-15, Conegliano, Italy 275653, Italian Association of Agricultural and Applied Economics (AIEAA).
    18. Abbott, Joshua K. & Allen Klaiber, H., 2013. "The value of water as an urban club good: A matching approach to community-provided lakes," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 208-224.
    19. Arlen Guarín & Sebastián Londoño & Carlos Medina & Julieth Parra & Christian Posso & Carlos Eduardo Vélez, 2016. "Estimating the Effect of Attending a Public versus a Private University in Colombia on Academic Achievement **** Una Estimación del Efecto sobre el Rendimiento Académico de Asistir a una Universidad P," Borradores de Economia 968, Banco de la Republica de Colombia.
    20. Raquel Justo & Emilio Congregado & Concepción Román, 2021. "Becoming self-employed from inactivity: an in-depth analysis of satisfaction," Small Business Economics, Springer, vol. 56(1), pages 145-187, January.

    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:kap:jcopol:v:44:y:2021:i:4:d:10.1007_s10603-021-09493-1. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.