How price-gouging regulation undermined COVID-19 mitigation: county-level evidence of unintended consequences

Despite long-standing criticisms, restrictions on price increases during emergencies remain widespread in the US. Criticisms most often cite the social costs of the shortages, but, we have found another, as yet unknown, cost: price-gouging regulations increased social contact during the onset of the COVID-19 pandemic. During the pandemic, thirty-four US states declared emergencies, which activated their preexisting price-gouging regulations, and eight others introduced new regulation along with their emergency declarations. Because these states border eight others that also declared emergencies, but had no price-gouging regulations, this created a unique natural experiment. Exploiting the pandemic-induced variation in regulation, and cellphone mobility data, we find that price controls increased visits to, and social contact in, commercial spaces, presumably because the regulation-induced shortages forced consumers to visit more stores and come in contact with more people as they struggled to find what they needed. This, of course, undermines social distancing efforts.

The online version contains supplementary material available at 10.1007/s11127-023-01054-z.