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Is the price right? The role of morals, ideology, and tradeoff thinking in explaining reactions to price surges

7 December 2022
2:00 pm
San Francesco Complex - classroom 2

Price surges often generate social disapproval and calls for regulation, such as price controls, but these interventions may cause economic inefficiencies and shortages. To study how individuals, perceive and reason about sudden price increases for different products under different policy regimes, we conduct a survey experiment with Canadian and U.S. residents. We find that price increases are not seen just as signals of scarcity; they cause widespread opposition and strong, polarized moral reactions. However, acceptance of unregulated prices is higher when potential economic trade-offs between unregulated and controlled prices are salient. The salience of trade-offs also reduces the polarization of moral judgments between supporters and opponents of unregulated pricing. Text analysis of the responses to open-ended questions supports the interpretation of our findings, and a donation experiment shows consistence between stated and revealed preferences. The results suggest that awareness of the causes and potential consequences of price increases may induce fewer extreme views about the role of market institutions in governing the economy.


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Nicola Lacetera, University of Toronto