An analysis of the enactment of anti-price gouging laws

Abstract

Anti-price gouging (APG) laws are state-level price controls only effective during times of emergency. From standard economic analysis, there are no apparent beneficiaries from price ceilings. Thus, the enactment of APG laws is puzzling from an economic perspective. The passage of APG laws is first analyzed with case studies of all thirty-one state laws. The case studies include information such as disasters that triggered the enactment of the laws, detail on enforcement and penalties, and information on supporters and opponents. This information is used to help determine why policymakers enact the laws. From the case studies, it is apparent that state officials devote significant resources to enforcing APG laws. Thus, it can be concluded that APG are not symbolic, toothless measures. A general lack of understanding of markets also appears to play a role in the laws' enactments.

Additionally, there are case studies of twelve states that do not currently have APG laws. In general, these states have either taken enforcement action without APG laws or considered an APG bill that ultimately failed. The enactment of the laws is also investigated with statistical models. The passage of APG laws is found to be associated with disaster variables like precipitation, hurricanes, and earthquakes. There is mixed evidence that poorer states are more likely to enact APG laws. More Democratic states are not more apt to adopt APG laws. Lastly, income dispersion and gas prices have no measurable effect on APG law passage.