It gives a nice economic model of price gouging, elasticity, and inequality, and presents a rigorous argument for why the typical utilitarian welfare theorems do not hold in the price gouging setting.
Their definition of “Price gouging occurs in a competitive market when lowering the price from the market-clearing level would increase total Utilitarian welfare” is a bit sneaky: it means that any time I say “here’s an example of where price gouging helps improve disaster response” they can just say “but that’s not real price gouging, since a lower price wouldn’t increase welfare”.
It also doesn’t look to me like the paper’s approach gives a good framework for thinking about long-term investment incentives and preparation for future disasters, or people selling/renting possessions they wouldn’t normally put on the market sell (air purifiers, renting spare rooms).
The paper’s division of circumstances into price gouging vs not isn’t a good match for the real world, and leads them to support policies like the current ones that normally don’t do anything and then suddenly make large impacts in a disaster. Instead I’d like to see recognition that it’s hard to determine welfare-maximizing pricing in real time and that price signals can reach very far, and instead use a mechanism that allows price increases to occur but redistributes some of the profits.
If you’re interested in this problem you should check out this preprint, written by a former colleague of mine:
https://bpb-us-e1.wpmucdn.com/sites.northwestern.edu/dist/1/2465/files/2025/02/Price-gouging.pdf
It gives a nice economic model of price gouging, elasticity, and inequality, and presents a rigorous argument for why the typical utilitarian welfare theorems do not hold in the price gouging setting.
Their definition of “Price gouging occurs in a competitive market when lowering the price from the market-clearing level would increase total Utilitarian welfare” is a bit sneaky: it means that any time I say “here’s an example of where price gouging helps improve disaster response” they can just say “but that’s not real price gouging, since a lower price wouldn’t increase welfare”.
It also doesn’t look to me like the paper’s approach gives a good framework for thinking about long-term investment incentives and preparation for future disasters, or people selling/renting possessions they wouldn’t normally put on the market sell (air purifiers, renting spare rooms).
The paper’s division of circumstances into price gouging vs not isn’t a good match for the real world, and leads them to support policies like the current ones that normally don’t do anything and then suddenly make large impacts in a disaster. Instead I’d like to see recognition that it’s hard to determine welfare-maximizing pricing in real time and that price signals can reach very far, and instead use a mechanism that allows price increases to occur but redistributes some of the profits.