A price theory of price gouging

Scott Kominers and Piotr Dworczak

No 104, GRAPE Working Papers from GRAPE Group for Research in Applied Economics

Abstract: We propose an economic definition of price gouging: Price gouging occurs in a competitive market when lowering the price from the market-clearing level would increase total Utilitarian welfare. We then use price-theoretic tools to characterize determinants of price gouging in a setting with income heterogeneity and non-quasi-linear preferences that induce a motive to redistribute across agents. The circumstances under which price gouging occurs in our framework align with the contexts covered by existing anti‒price gouging laws. By proposing a definition of price gouging that does not appeal to any non-economic notions of (un)fairness or excess, we hope to provide a pathway for follow-up theoretical and empirical research.

Keywords: price gouging; price control; market design (search for similar items in EconPapers)
JEL-codes: D47 D63 D82 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2025
New Economics Papers: this item is included in nep-com, nep-des, nep-ind, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:fme:wpaper:104

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