As part of the Joint webinar series organised by the Department of International Economics and the CEPR, we are pleased to invite you to an online public talk by Professor Luis Cabral. He will present his paper
coauthored with Lei Xu and published in the Covid Economics, Vetted and Real-Time Papers series (CEPR Press, Issue 12, May 2020).
Register for this event and join live.
Abstract: We test the theory that seller reputation moderates the effect of demand shocks on a seller's propensity to price gouge. From mid January to mid March 2020, 3M masks were priced 2.72 times higher than Amazon sold them in 2019. However, the difference (in price ratios) between a post-COVID-19 entrant and an established seller is estimated to be about 1.6 at times of maximum scarcity, that is, post-COVID-19 entrants price at approximately twice the level of established sellers. Similar results are obtained for Purell hand sanitizer. We also consider cumulative reviews as a measure of what a seller has to lose from damaging its reputation and, again, obtain similar results. Finally, we explore policy implications of our results