Microeconomics Seminar with Mario Macis (John Hopkins)

Is the price right? The role of morals, ideology, and tradeoff thinking in explaining reactions to price surges (with Julio Elías and Nicola Lacetera)
Wed, 23 March, 2022 4:30pm

Price surges often generate social reprobation and requests for regulation and price controls. However, these interventions may cause inefficiencies and shortages. We conducted a survey experiment with Canadian and U.S. residents to study how individuals perceive and reason about sudden price increases for different products. Econometric and textual analyses indicate that prices are not seen just as signals of scarcity; they also cause strong and polarized moral reactions. The acceptance of free price adjustments also depends on people's overall attitudes about the function of markets and the government in society. However, support of unregulated prices is higher when potential economic tradeoffs between unregulated pricing and price controls are salient, and higher production costs contribute to higher prices. The salience of trade offs also reduces the polarization of moral judgments and ideological differences between supporters and opponents of unregulated pricing. A donation experiment corroborates these findings. Transparency about causes and potential consequences of price adjustments may induce less extreme views about the role of market institutions in governing the economy.

Seminar will be in person and also held Virtually. Please sign up for our seminars listserv to receive the details.


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