Why do Citizens Support Price Controls? The Role of Motivated Beliefs

Stanislao Maldonado and Santiago I. Sautua

No 14618, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Despite broad expert consensus that price controls are economically inefficient, they remain popular. We study this puzzle through the lens of motivated beliefs: Individuals who favor government intervention may derive gratification from believing that price controls increase welfare. In a laboratory market, participants shopped under monetary incentives and chose between a free-market regime and a price-cap regime. We varied whether participants learned about the cap through factual information or direct exposure to its consequences, and whether their regime choice was decisive. We find that both information and exposure reduced support for the price cap, but exposure was substantially more effective. However, many participants continued to support the cap after experiencing shortages. Participants with decisive regime choices were less likely to endorse the price cap after adverse outcomes. Thus, support for inefficient policies reflects not only misinformation but self-serving beliefs that persist when individuals are not held accountable for policy outcomes.

Keywords: Price Caps; Motivated Beliefs; Inefficient Economic Policies (search for similar items in EconPapers)
JEL-codes: C91 D03 D72 D83 (search for similar items in EconPapers)
Date: 2026-05
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:14618

DOI: 10.18235/0014036

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