The Price is Right!:

Citizens and legislatures alike have become increasingly fearful of disasters and have sought to provide remedies to their harmful effects. One popular remedy has been the imposition of post-disaster price controls through state price gouging laws. In the legal literature these laws have been widely supported, while the economic literature largely condemns them. This article attempts to reconcile the two fields’ views of price gouging laws. To our knowledge, it is the first comprehensive and detailed list of all price gouging laws. This objective summary will serve to foster a more well informed debate about the benefits of price gouging laws. The article investigates the long term and unseen effects of price controls in a disaster context by examining the incentives created by allowing market prices. Higher prices in a post-disaster setting have the beneficial effect of creating incentives for out of region sellers to bring needed goods in, encouraging demanders to conserve, and spurring entrepreneurial discovery of innovative ways to meet peoples’ needs. Finally, the article addresses the real problem of post disaster fraud and proposes a more desirable approach to deterring fraud than current price gouging laws. The risk of losing reputation will deter established sellers from engaging in fraud. Price gouging laws will deter established sellers from engaging in fraud. Price gouging laws will deter those same sellers from operating in many post-disaster markets. Price gouging laws will encourage more sales by those sellers who will commit fraud.

Find the article at HeinOnline.