Luis Cabral and Lei Xu's "Seller reputation and price gouging: Evidence from the COVID-19 pandemic," published in the Economic InquiryMay 28, 2021
From mid-January to March 2020, 3M masks sold on Amazon by third party sellers were priced 2.4 times higher than Amazon's 2019 price. However, this price increase was not uniform across sellers. We estimate that when Amazon is stocked out (one of our measures of scarcity) new (entrant) sellers increase price by 178%, whereas the continuing sellers' increase is limited to 56.7%. This is consistent with the idea that seller reputation limits the extent of profitable price gouging. Similar results are obtained for Purell hand sanitizer and for other measures of scarcity. We also explore policy implications of our results.
Luis Cabral is the Paganelli-Bull Professor of Economics and Int. Business & Chair of the Department of Economics.
Read the full paper here.