Anti-price gouging laws prolonged shortages of certain goods that were in high demand early in the pandemic. Some analysis suggests these laws even worsened public health outcomes, because ongoing shortages of, say, hand sanitizer and toilet paper, led to consumers in states with these regulations searching for them more at physical retailers, actually increasing transmission of the virus.

But there’s an interesting question that’s often underexplored in regard to these laws: how does the expectation that these price controls will be triggered shape people’s beliefs about products’ availability and so customer search behavior?

That’s the topic of another fascinating new paper by economists Rik Chakraborti and Gavin Roberts. Using data for online searches for hand sanitizer and toilet paper across states, they harness the variation in when laws were introduced to research the question: is consumer search behaviour different in states with new anti-price gouging legislation introduced during the pandemic from states with pre-existing anti-price gouging laws?

Economic theory would suggest that any anti-price gouging legislation, whenever introduced, would lead to more consumer search for goods, due to the induced shortages. And, sure enough, after controlling for the effects of lockdowns, rising infections, and declines in travel which plagued the early stages of the pandemic, consumers in states with anti-price gouging laws were significantly more likely to search online for toilet paper and hand sanitizer than those in states without such laws.

More searching presumably reflects higher levels of hoarding and panic-buying creating the shortages—after all, having to resort to online shopping for goods that are commonly bought in stores means the local grocery or drug store has probably been emptied already.

But theory would also suggest that customers in states with past experience of anti-price gouging laws might search even more intensely, because people come to expect shortages again when crises hit. In other words, those who have experienced shortages before might be more likely to hoard and panic buy this time around, leading to even higher online search than in situations where new laws are introduced for the first time.

Again, Chakraborti and Roberts’ paper suggests economic theory is correct. States with anti-price gouging regulations on the books before the pandemic saw Google Shopping searches for hand sanitizer jump by 153 percent and toilet paper searches nearly double (a 99 percent increase) relative to states without anti-price gouging laws. This uplift was much larger than in states where the laws were introduced during the pandemic (100 percent and 46 percent, respectively).

The long and short is that consumers in states with pre-existing price controls searched most intensely online for hand sanitizer and toilet paper. This suggests customers learned from previous experience of these price regulations’ effects, with the higher search levels reflecting greater hoarding and panic buying in anticipation of shortages to come. As the authors state, this implies that longstanding anti-price gouging legislation is even worse for economic welfare than we might think. The anticipation of shortages actually compounds shortages as consumers become more “experienced,” with excessive and fruitless searching for products the wasteful result.

For more on the basics of anti-price gouging legislation in the pandemic, see my book Economics In One Virus. Other Cato pieces can be found here, here, and here.