Julio Elías, Nicola Lacetera , Mario Macis Management Science
Published Online:4 Jul 2025https://doi.org/10.1287/mnsc.2024.04555
Elias, Lacetera, and Macis have a new paper exploring reactions to price surges. From the paper:
[The] conflicting views between the principle of economic efficiency and the values of the general public become particularly evident in the reactions to price surges. Historically, price increases of staple goods often caused protests and riots (Bellemare 2014, Bentley 2001). In more recent times, social disapproval and moral outrage have often followed the sudden increase in the price of various products and services, such as “surge pricing” by ride-sharing companies in response to extreme weather or other emergencies, or the major increase in prices of surgical masks, hand sanitizer and certain pharmaceutical drugs during the COVID-19 pandemic. . . .
[W]e document widespread opposition to sudden price surges, motivated in large part by moral and ideological considerations. However, explicitly describing possible economic tradeoffs between policy regimes does affect people’s reactions by making them more open to letting prices move freely. This result suggests that people do not immediately consider efficiency or equilibrium considerations when reacting to and expressing a judgment about price surges. When considerations about economic efficiency are missing, moral reactions are highly polarized; when economic tradeoffs are explicit, views tend to converge. However, the fact that most respondents still support price control policies in this case suggests that this position derives from normative concerns and not necessarily from lack of consideration for equilibrium effects and efficiency implications.
Read the full paper here.