Luís Cabral, Lei Xu, 07 May 2020

As with other crises, the COVID-19 pandemic has seen sudden excess demand for certain goods and consequent price surges. Such price hikes often lead the public to call for laws protecting consumers from price gouging. This column provides evidence that larger and older sellers engage less in price gouging as they risk greater reputational loss from hiking prices in response to excess demand. Policymakers might use seller reputation as a policy tool by barring new sellers from setting prices higher than incumbent sellers.

Micael Castanheira, Carmine Ornaghi, Georges Siotis, 01 March 2017

Conventional wisdom holds that increased competition improves market outcomes. This column argues that the link from competitiveness to allocative efficiency is weaker than this wisdom would suggest. Using evidence of generic substitutes of previously patent-protected drugs, it shows that firms can use non-price instruments which affect – or even reverse – the way competitive shocks alter market outcomes, with significant welfare implications.

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