Estimating the Distaste for Price Gouging with Incentivized Consumer Reports

Abstract

Thirty-four states prohibit price increases during emergencies, and individuals take costly actions to report violators. We measure experimentally the willingness to pay to report sellers who increase prices of personal protective equipment. Over 75 percent of subjects pay to report, even if others are willing to buy at those prices. We argue that reports contain information about a desire to prevent or punish third-party transactions at unfair or illicit prices. Reports are partially driven by a distaste for firm profits or markups, implying that the distribution of surplus between producers and consumers matters for welfare. (JEL C93, D22, D63, D91, H12, K22)