Mario Macis, PhD of Carey Business School and member of HBHI’s Leadership Committee won a 2020 HBHI pilot grant on “Social Support for Markets in Health and Healthcare: Insights from the COVID-19 Pandemic.” His efforts produced aworking paperwhich was disseminated in April 2022 by the National Bureau of Economic Research (NBER) as well as two research networks in Germany.
Macis, in collaboration with researchers from Universidad del CEMA and the University of Toronto, combined U.S. and Canadian data on residents’ views on price surges in the context of COVID-19 upending the global economy. The paper, “Is the Price Right? The Role of Morals, Ideology, and Tradeoff Thinking in Explaining Reactions to Price Surges,” explores how people react to sudden price increases and how they choose between free-market unregulated pricing versus government-imposed price controls. The team presented surveys based on hypothetical scenarios as well as a real-stakes choice task.
The researchers found that two-thirds of respondents were against unregulated prices, especially for health-related products. However, support for unregulated pricing significantly rose if tradeoffs were made salient; in other words, there were noticeable societal gains which were morally favorable.
[P]eople see prices and price surges as more than just signals of relative scarcity. Respondents have strong and heterogeneous moral reactions to different pricing regimes, and their preferences are strongly affected by their underlying “ideology” about the role of markets in society overall. On the other hand, when the potential economic consequences of unregulated or controlled prices are more explicit, people’s opposition to market-driven price adjustments significantly decreases.
The authors suggest that businesses must realize that their pricing decisions do face moral scrutiny by consumers who desire fairness. So, when the public is made aware of causes and possible consequences of price increases—such as higher production costs during a pandemic to get goods out—they are more likely to accept that reality of the market and have less fixated opinions on price regulation. If higher costs are required to increase product or service accessibility, then people are likelier to accept the tradeoff on moral grounds.
“Is the Price Right? The Role of Morals, Ideology, and Tradeoff Thinking in Explaining Reactions to Price Surges,” was co-authored by Julio J. Elias and Nicola Lacetera.