Scales of Justice Balancing Price Hikes During Pandemic

Price Gouging in the Pandemic: Are We Fairly Judging Price Hikes?

Kai Mendoza in Business & Economy July 2025 • 4 min read.

"Explore how perceptions of fairness affect our acceptance of price increases during crises, revealing surprising insights into consumer behavior and economic principles."

The COVID-19 pandemic brought more than just health concerns; it also triggered significant economic shifts, including noticeable price increases on everyday goods. As consumers, we often react strongly to these changes, labeling some as unfair or even exploitative. But how much of this reaction is based on a rational understanding of market forces, and how much is driven by our inherent sense of fairness?

New research dives into these questions, exploring how consumers in the U.S. and Israel perceived price hikes during the pandemic. The study, titled "Price Gouging or Market Forces? Fairness Perceptions of Price Hikes in the Pandemic," investigates the factors that influence our acceptance of rising prices, focusing on whether we attribute them to legitimate cost increases or opportunistic demand exploitation.

By understanding these perceptions, we can gain valuable insights into consumer behavior, market dynamics, and the ethical considerations that shape our economic landscape. Let's explore the key findings of this study and uncover the complex interplay between price, fairness, and public sentiment.

Why Do We Get So Mad About Price Increases?

Scales of Justice Balancing Price Hikes During Pandemic

At the heart of the matter lies a concept called "dual entitlement," which suggests that consumers feel entitled to their established transaction terms, while firms are expected to maintain their reference profits. When prices surge unexpectedly, it violates this sense of entitlement, leading to feelings of unfairness and resentment. But this is just the beginning.

The research identifies several factors that influence whether we perceive a price increase as fair:

The Reason Behind the Hike: Is it due to increased costs for the seller (like supply chain issues) or simply because they know people are willing to pay more (increased demand)?
The Type of Product: Are we talking about essential goods, like face masks or hand sanitizer, or more discretionary items?
Where You Live: Cultural and economic factors can significantly impact how people perceive price changes.

Interestingly, the study found that people are generally more accepting of price increases when they're attributed to cost increases rather than demand surges. This aligns with the dual-entitlement principle – we're more understanding when businesses face higher costs, but less so when they seem to be taking advantage of a crisis.

What Does This Mean for Businesses and Consumers?

Understanding how consumers perceive price increases is crucial for businesses navigating economic fluctuations. Transparency about cost increases and avoiding the appearance of opportunistic pricing can help maintain customer trust and loyalty. For consumers, recognizing the complexities of market dynamics can lead to more informed and rational purchasing decisions, even during times of crisis. While our sense of fairness is a powerful motivator, a deeper understanding of economic principles can help us navigate the world of pricing with greater awareness and less outrage.

About this Article -

This article was crafted using a human-AI hybrid and collaborative approach. AI assisted our team with initial drafting, research insights, identifying key questions, and image generation. Our human editors guided topic selection, defined the angle, structured the content, ensured factual accuracy and relevance, refined the tone, and conducted thorough editing to deliver helpful, high-quality information.See our About page for more information.

This article is based on research published under:

DOI-LINK: 10.13140/rg.2.2.26574.06727,

Title: Price Gouging Or Market Forces? Fairness Perceptions Of Price Hikes In The Pandemic

Subject: econ.gn q-fin.ec

Authors: Avichai Snir, Daniel Levy, Dudi Levy, Haipeng Allan Chen

Published: 12-03-2024

Everything You Need To Know

What is the core concept that explains why we perceive price increases as unfair?

The core concept is "dual entitlement." This theory posits that consumers feel entitled to the terms they've come to expect in transactions, while firms are expected to maintain their reference profits. When prices increase unexpectedly, especially during a crisis, it disrupts this established expectation, leading to feelings of unfairness and resentment towards the price hikes, thus consumers attribute the increases as exploitative.

How do the reasons behind a price hike influence our perception of its fairness?

The study reveals that the reason for a price increase significantly affects our perception of its fairness. If the increase is due to increased costs for the seller, such as supply chain issues, consumers are generally more accepting. However, if the price hike appears to be a result of opportunistic demand exploitation, consumers are much more likely to view it as unfair. This links directly to the "dual entitlement" principle; we are more understanding when businesses face higher costs but less so when they capitalize on a crisis to increase profits.

What role does the type of product play in how we perceive price increases?

The type of product is another critical factor. Price increases on essential goods, such as face masks or hand sanitizer, tend to be viewed more critically than increases on discretionary items. This is because essential goods are considered necessary for survival or basic well-being, and price hikes on these items can be seen as taking advantage of people during a vulnerable time. In contrast, price increases on non-essential items may be viewed less harshly.

How can businesses use this knowledge about fairness perceptions to their advantage?

Businesses can use this understanding to navigate economic fluctuations more effectively. Transparency about cost increases is crucial. By being open about why prices are rising (e.g., due to supply chain issues), businesses can mitigate negative perceptions. Avoiding the appearance of opportunistic pricing, such as excessively high markups during a crisis, can help maintain customer trust and loyalty. Businesses that align with these principles are likely to be perceived more favorably during times of economic uncertainty.

Why is understanding the interplay between price, fairness, and public sentiment important for consumers?

Understanding this interplay can lead to more informed and rational purchasing decisions. While our sense of fairness is a powerful motivator, a deeper understanding of economic principles and market dynamics, such as supply and demand, can help consumers navigate pricing with greater awareness and less outrage. Recognizing the factors that influence price increases allows consumers to make better judgments, considering both their sense of fairness and the realities of the market.