Expert opinions and negative externalities do not decrease support for anti-price gouging policies

Abstract

During disasters, citizens call for “anti-price gouging” policies. However, majorities of economists oppose such policies. For democracy to function, citizens should be responsive to policy-relevant information—especially from experts. What impact does exposure to the potential negative externalities have on public support for anti-price gouging policies? We hypothesize that if the public were exposed to such information, they would be less supportive of anti-gouging policies. We employ two survey experiments: one administered in Florida (n = 2085), a state prone to hurricane activity, and the second in the United States (n = 2023) at the onset of the COVID-19 pandemic. Both show that the public overwhelmingly supports anti-price gouging policies, regardless of exposure to information about negative externalities, even when it comes from experts.

Keywords

Expert consensus disasters COVID-19 price gouging public opinion

Pandemics, hurricanes, and other disasters are predicted to become more frequent (Brusentsev and Vroman, 2017). Such disasters invariably disrupt supply chains and spark price increases. Therefore, citizens often call for policies prohibiting “price gouging.” However, such policies are opposed by majorities of economists (IGM Forum, 2012), likely due to concerns that artificial price ceilings can produce product shortages and store closures. Thus, on anti-gouging legislation, the public’s preferences diverge from those of experts.

Scholars have long been concerned with the ability of citizens to process information and weigh expertise when considering policy alternatives (Lupia and McCubbins, 1998; Carpini and Keeter, 1996; Page, et al. 1987). We therefore examine how exposure to the potential negative consequences of a policy affect public support for that policy. We hypothesize that if the public were made aware of such consequences, especially if they were predicted by majorities of experts, the public would be less supportive of such policies.

To test our hypothesis, we provide the results of two survey experiments, one from Florida (n = 2085), a state prone to hurricanes, and the second from the United States (n = 2023) at the onset of the COVID-19 pandemic when goods such as toilet paper were scarce. We find that the public overwhelming supports anti-gouging laws, regardless of exposure to information about their potential negative consequences, even when that information comes from majorities of experts. Our findings have implications for scholars of public opinion and policy, and suggest that, while sometimes effective (Van der Linden et al., 2017), there are limits to the persuasive effects of expert consensuses.

Public opinion and price gouging

Price gouging policies are contentious and there remains a disconnect between economists and economic theory on the one hand and politicians and public opinion on the other. The notion of a “fair” price has historical roots and the public often perceives price increases as “unfair” (Tarrahi et al., 2016). During disasters, price gouging arouses emotional responses and moral considerations (Snyder, 2015). As such, discussions of the practice often vilify those engaging it. For example, during the COVID-19 pandemic, many politicians blamed price increases on “greed,” (Rampell, 2021), and after Hurricane Andrew ravaged Florida, an opinion writer for the Miami Herald said he would, “like to punch out those price-gouging creeps” (Musgrove, 1992).

Such sentiments are reflected in studies of opinions toward price gouging. In the most famous example, Kahneman et al., (1986) told a small sample of Canadians that, “a hardware store has been selling snow shovels for $15. The morning after a large snowstorm, the store raises the price to $20.” Eighty-two percent found the price increase “unfair” or “very unfair” and subsequent studies have documented similar reactions (e.g., Tarrahi et al., 2016).

However, majorities of economists counsel against price ceilings (Trujillo et al., 2020), arguing that they lead to shortages, closures, and other negative externalities (Chakraborti and Roberts, 2020; Beatty et al., 2021). For example, when asked if “Connecticut should pass its Senate Bill 60, which states that during a ‘severe weather event emergency, no person within the chain of distribution of consumer goods and services shall sell or offer to sell consumer goods or services for a price that is unconscionably excessive’,” 51% of economists disagreed while only eight percent agreed. When these responses were weighted by the economists’ level of confidence in their view, 77% disagreed and seven percent agreed (IGM Forum, 2012, see also IGM Forum, 2022). Not only are many experts against anti-price gouging laws, but they often praise price increases, arguing that because prices function as information, they allow producers and retailers to understand what the public values most (Surowiecki, 2014; Munger, 2007). This is but one of many areas, particularly in which economics are involved, that the opinions of experts and the public diverge (Caplan, 2011; Johnston and Ballard, 2016).

It is not our purpose to adjudicate the ethics of price gouging, or the effects of laws intended to curtail it. Such considerations are multi-faceted and studies disagree on the benefits of such laws (Oladosu, 2021). Rather, we are interested in the discrepancies between lay and expert views and how the latter might inform the former. How the public views price increases during catastrophes determines, at least partially, how the government intercedes, which could then make conditions better or worse for a vulnerable public.

While scholars have learned much about attitudes toward price gouging, prior studies often rely on small convenience samples, lack experimental designs, or center on general perceptions of fairness rather than support for actionable policies to address gouging (e.g., Kahneman et al., 1986; Bechwati et al., 2009). To improve upon previous studies, we draw on two large surveys, employ experimental designs, and test whether citizens display lower levels of support for anti-price gouging policies if presented with information (from economic experts) about the potential for negative consequences stemming from those policy preferences.

Our study design is therefore designed to move beyond simply measuring baseline opposition to price gouging itself. For citizens to make reasoned choices, they must be able to consider the potential consequences of their policy preferences (Lupia and McCubbins, 1998). In this vein, many studies find that exposure to policy information can influence policy preferences (Porter and Wood, 2021; Esterling et al., 2021; Cobb and Kuklinski, 1997). However, other studies find that exposure to information fails to change broader views or preferences (Guess et al., 2020; Nyhan et al., 2020; Sides, 2021). This issue becomes more concerning when the information in question comes from experts: the successful mitigation of societal problems often depends on the public’s willingness to follow expert recommendations. Many studies find that people are likely to update both their factual beliefs and their policy preferences when exposed to expert opinion and consensuses (Van Stekelenburg et al., 2022; Lavezzolo et al., 2021; Van der Linden, 2021). But, the limits of expert opinion as a tool for altering policy preferences have yet to be fully understood (Sides, 2021; Johnston and Ballard, 2016), as many people reject expert opinion (Merkley, 2020).

We suspect that economic experts and laypeople hold differing views toward anti-price gouging laws because experts have the ability to consider the potential negative externalities of anti-gouging policies, have both access and the ability to understand the available empirical findings, and are regularly exposed to the opinions of other experts (e.g., Druckman and Nelson, 2003). In short, the public might be supportive of anti-price gouging laws because they have not considered the information that experts regularly consider. We therefore hypothesize that if the public were made aware of the potential negative effects of anti-price gouging laws, it would be less supportive of such laws. Further, we hypothesize that if the public were made aware that majorities of experts expected those negative effects, it would be even less supportive.

Study 1: State of Florida survey

Florida is both prone to hurricanes and well acquainted with anti-gouging laws (Bousquet, 2017); therefore, the state provides a critical case. Partnering with Qualtrics, we fielded a survey to 2085 adult Floridians from August 8 to 21, 2018, about a year after the landfall of Irma, a Category 4 Hurricane. A quota-based recruitment procedure produced a sample matching the U.S. census records on sex, age, and income, with a race/ethnic minority oversample. See the appendix for further information on the survey including sample demographics.

In a between-subjects design, respondents were randomly assigned to one of three different versions of the following question:

• The State of Florida passed a law prohibiting stores from increasing prices—“price gouging”—during a hurricane. Stores that attempt to “price gouge” may be prosecuted. Do you support this law? “Yes,” “No,” “Not Sure”

The control group (n=717) was asked the question as stated above. The two treatment groups received the same question but with one of the following statements added:

• “Stores Run Out” (n = 650): “…may be prosecuted. Because of this law, some items will likely sell out and not be available to you. Do you support…”

• “Stores Close” (n = 717): “…may be prosecuted. Because of this law, some stores will likely close because it will not be worth the safety risk to stay open. Do you support…”

These two treatments reflect not only the views of many experts on the topic, but would, in effect, make price controls moot: if the goods were unavailable or the stores were closed, mandated prices would do little to help the public. Therefore, we expect that exposure to one of these treatments to decrease support for the law.

A multinomial logistic regression model (with control condition as the base category) was used to assess variation in subject demographics and partisanship across the treatment groups (see Appendix). Individuals in the “stores close” condition were more likely to be female. To assess the outcome of the experiment we conducted a one-way ANOVA of respondents’ attitudes toward price gouging laws, with experimental condition as the co-variate. To account for imbalance in gender we included this factor as a control. Sample sizes vary due to listwise deletion of missing data (113 participants who responded “not sure” were excluded).

The ANOVA results show no systematic variation across the treatment groups (Figure 1; F_2,1955 = 0.26, p = .77). Regardless of whether respondents received the “stores run out” or “stores close” treatment, respondents remained strongly in favor of anti-price gouging laws. Exposure to the potential negative consequences of anti-gouging laws, contrary to expectations, does not appear to affect citizens’ support for those laws. Additionally, a post-hoc analysis was conducted by adding partisanship and the interaction of partisanship and treatment group to the ANOVA. These results show no systematic variation by partisanship (F_3,1955 = 1.22, p = .30), nor by the interaction of partisanship and treatment group (F_6,1955 = 1.36, p = .23).

Figure 1.

Support for anti-price gouging laws by experimental condition. Error bars represent 95% confidence intervals.

Study 2: United States national survey

In Study 1, we found that exposure to the negative consequences of anti-gouging laws did not significantly affect citizens’ support for those laws. However, the experimental treatments in Study 1 did not specify whether it was experts who predicted the shortages and closures. We therefore include in Study 2, along with the two treatments from Study 1, two additional treatments including cues about the opinions of economic experts. Floridians longstanding experiences with anti-gouging laws may have made them less concerned about the negative consequences of the laws because they regularly anticipate shortages and closures (Chakraborti and Roberts, 2021); therefore, we suspect that exposing a national sample to the negative externalities would significantly impact their policy views. Our expectation is that exposure to expert opinions detailing potential negative consequences will dampen support for the laws.

Study 2 was fielded by Qualtrics and administered from March 17-19, 2020 to 2023 Americans (see appendix). The survey was designed to match U.S. Census records on sex, age, race, and income. During the survey field period, the COVID-19 pandemic began and the U.S. experienced widespread shortages of hand sanitizer, toilet paper, and other essential goods. Supply chain issues, price gouging, and anti-price gouging laws were salient in the news.

In a between-subjects design, respondents were assigned randomly to one of five different wordings of the following question:

• Control: “Your state government is considering passing a law prohibiting stores from increasing prices—‘price gouging’—during a natural disaster (i.e., disease outbreaks, natural disaster). Stores that attempt to ‘price gouge’ may be prosecuted. Do you support this law? ‘Yes’, ‘No’, ‘Not Sure’.”

The control group (n = 413) was asked the question as stated above. The four treatment groups received the same question but with the following statements added:

• “Stores Run Out” (n = 405): “…may be prosecuted. Because of this law, some items will likely sell out and not be available to you. Do you support…”

• “Stores Close” (n = 401): “…may be prosecuted. Because of this law, some stores will likely close because it will not be worth the safety risk to stay open. Do you support…”

• “Stores Run Out/Expert Source” (n = 409): “…may be prosecuted. A majority of economic experts agree that because of this law, some items will likely sell out and not be available to you. Do you support…”

• “Stores Close/Expert Source” (n = 395): “…may be prosecuted. A majority of economic experts agree that because of this law, some stores will likely close because it will not be worth the safety risk to stay open. Do you support…”

A multinomial logistic regression model (with control condition as the base category) was used to assess variation in subject demographics and partisanship across the treatment groups (see Appendix). Individuals in the “stores run out” condition had lower levels of education relative to those in the control group, and individuals in the “stores close” condition were older relative to those in the control group. To assess the outcome of the experiment we conducted a one-way ANOVA of respondents’ attitudes toward price gouging laws, with experimental condition as the co-variate. To account for imbalances in education and income, both were included as control factors. Sample sizes vary due to listwise deletion of missing data (253 participants who responded “not sure” were excluded from the analysis).

As in Study 1, anti-gouging laws are strongly supported in every condition and there is no systematic variation across the treatment groups (Figure 2; F_4,1693 = 1.50, p = .20). The pooled response to all four treatments did not differ from the control condition (F_1,1693 = 2.98, p = .084), nor did the pooled responses to the no expert conditions compared to the pooled responses to the expert conditions (F_1,1321 = 0.07, p = .80). Regardless of whether respondents are primed with information about negative consequences, or whether the source of that information is from “a majority of economic experts,” respondents remained in favor of anti-price gouging laws. Additionally, a post-hoc analysis was conducted by adding partisanship and the interaction of partisanship and treatment group to the ANOVA. These results show no systematic variation by partisanship (F_3,1678 = 1.31, p = .27), nor by the interaction of partisanship and treatment group (F_12,1678 = 0.88, p = .57).

Figure 2.

Support for anti-price gouging laws by experimental condition. Error bars represent 95% confidence intervals.

Discussion and conclusion

Given that disasters may be increasing in magnitude and frequency (Brusentsev and Vroman, 2017), it is necessary to understand the public’s preferences for dealing with such disasters. We suspected that citizens would favor anti-price gouging laws to keep prices down and because gouging seems immoral (Snyder, 2015). We predicted that the public would be less supportive of these laws if exposed to the possibility that access to goods might be curtailed. We also predicted that the public would be further swayed when the potential negative consequences were attributed to experts.

Respondents in both studies overwhelmingly favor anti-price gouging laws. For politicians, therefore, there are clear incentives to publicly support anti-price gouging laws and it should be no surprise that more than 40 U.S. states have them (Levenson, 2020). Figures 1 and 2 show that respondents’ support for these laws is not influenced by exposure to information about their potential negative consequences and the results in Figure 2 show that support is not influenced when that information comes from “a majority of economic experts.” It could be that support for such legislation is so strong that exposure to countervailing information—even from experts—is insufficient to sway opinion due to processes of motivated reasoning (Kunda, 1990). It could also be that the public is particularly resistant to arguments from economists (Johnston and Ballard, 2016). Future studies should vary the policy and the types of experts in question.

Future research should also examine the mechanisms that underlie the findings presented here. Perhaps altering the size of the consensus or the type of experts could shed light on what it is about expert opinion that affects public preferences. For example, some research shows that the public is unlikely to be swayed by economic experts because the public overestimates its own knowledge of economics (Meyers et al., 2020; Johnston and Ballard, 2016). Further, scholars should seek to better understand the conditions under which expert opinions affect the public’s policy preferences. Whereas experts and expert consensuses are effective in some circumstances (Van Stekelenburg et al., 2022), researchers should attempt to understand the limits of expert opinion as a persuasive tool.

Numerous studies have sought to understand the public’s policy preferences in cases in which there is significant elite polarization in opinion (i.e., climate change policy). Anti-price gouging laws, however, are an area where there is little debate among political elites. Unlike many issues in the polarized U.S. political landscape, partisanship appears to play little role in determining support for anti-gouging laws: in Study 1, 94% of Democrats and 95% Republicans were supportive of the law; in Study 2, 89% of both Democrats and Republicans were supportive. Future research should examine other policy opinions where polarized elites or partisan identities are not a guiding force; such efforts could identify understudied non-partisan factors driving political preferences. While our data speaks only to the U.S., anti-price gouging laws are often touted by lawmakers in other contexts (Goodman and Lister, 2020). Future studies should therefore examine support for such laws outside the U.S.

Scholars have long noted that the public has a negative view of economic markets. Economist Joseph Schumpeter (1954) attributed this to “anti-market” bias, which he described as an “ineradicable prejudice” in which “every action intended to serve the profit interest must be anti-social by this fact alone.” This bias appears engrained in lay people’s perceptions of economic transactions (Rubin, 2014), leading them to have economic views that diverge greatly from those of economists (Caplan, 2011). Thus, many are quick to view price increases as the result of greed or of a conspiracy (Leiser et al., 2017). We suspect that such biases play a strong role in our findings and future research should attempt to explicitly measure and account for these. To account for such perceptions of economics and markets when studying policy preferences, political scientists should expand the list of factors accounted for beyond partisan and ideological identities.

The disconnect between public and expert opinion presents important questions about democracy. How can the public guide public policy if it ignores the potential consequences of its preferences? How can elected officials best pursue policy if constituent preferences run counter to experts? If the public ignores expert consensuses, politicians will be incentivized to ignore them as well. Political scientists should continue to study the public’s views towards market regulations. While disasters are worthy of attention because they are sudden shocks, similar policy questions always affect markets and future studies should address a broad set of cases. Such a research agenda should be a priority for researchers given the current market disruptions (e.g., gas and energy prices, baby formula shortages) caused by COVID-19, war, and government regulations and interventions into markets.

Supplemental Material

Supplemental Material - Expert opinions and negative externalities do not decrease support for anti-price gouging policies

Supplemental Material for Expert opinions and negative externalities do not decrease support for anti-price gouging policies by Casey Klofstad and Joseph Uscinski in Research & Politics

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Data collection efforts were funded by internal grants from the University of Miami College of Arts and Sciences and the University of Miami U-Link program. The efforts of Uscinski and Klofstad are funded by the National Science Foundation, SaTC Award #2123635.

Ethical Statement

ORCID iD

Joseph Uscinski

Supplemental Material

Supplemental material for this article is available online.

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