Surreal illustration depicting the concept of price gouging during a pandemic.

Price Gouging or Market Forces? Decoding Pandemic Price Hikes

Reese Marlowe in Business & Economy December 2025 • 4 min read.

"Explore how fairness perceptions and cost factors influenced consumer attitudes during the COVID-19 pandemic's volatile pricing environment."

The COVID-19 pandemic brought unprecedented challenges, including significant shifts in pricing for essential goods. As demand surged and supply chains faced disruptions, consumers grappled with rising costs. This situation sparked intense debate: were these price hikes justified by market forces, or did they represent opportunistic price gouging?

Understanding how consumers perceive price fairness is crucial. Research suggests that our sense of what's fair is influenced by factors beyond simple supply and demand. The 'dual-entitlement' principle, for example, suggests that consumers feel entitled to their regular transaction terms, while firms are entitled to their reference profits. Disruptions to these expectations can lead to feelings of unfairness and resentment.

This article explores the findings of a survey conducted in the US and Israel in 2020, examining consumer perceptions of price increases during the pandemic. By analyzing how people reacted to different justifications for price hikes, we gain valuable insights into the complex interplay of economics, psychology, and ethics that shapes our understanding of fair pricing.

Decoding the Drivers of Unfairness: Demand vs. Supply

Surreal illustration depicting the concept of price gouging during a pandemic.

The survey revealed a consistent pattern: consumers were more accepting of price increases attributed to cost increases (supply shocks) than those blamed on rising demand. This aligns with the dual-entitlement principle, where cost increases are seen as a legitimate reason for businesses to adjust prices. When demand alone drives up prices, it's more likely to be perceived as unfair exploitation.

However, the study also highlighted interesting differences between the US and Israeli respondents. Israelis, overall, viewed price increases as less acceptable than their American counterparts. This could be attributed to a stronger cultural emphasis on price stability or a greater sensitivity to perceived exploitation in times of crisis.

Dual Entitlement: Cost-justified increases are generally more palatable.
Cultural Context: Israelis showed greater price sensitivity than Americans.
Product Matters: Perceptions varied significantly depending on the specific good.

Interestingly, the type of product also played a significant role. For certain essential goods like hand sanitizer and toilet paper, a majority of respondents found price increases unacceptable regardless of the stated reason. This suggests that for items considered basic necessities, consumers have a lower tolerance for any form of price hike during a crisis.

The Takeaway: Fairness in a Crisis

The pandemic-era price gouging debate underscores the importance of understanding consumer perceptions of fairness. While economic principles dictate that prices can fluctuate based on supply and demand, these findings highlight the psychological and ethical dimensions that shape consumer attitudes. Businesses that are transparent about cost increases and avoid excessive price hikes on essential goods are more likely to maintain consumer trust and avoid accusations of unfair practices. Moving forward, these insights can help businesses navigate future crises with greater sensitivity and awareness of consumer expectations.

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.

Everything You Need To Know

What is the 'dual-entitlement' principle, and how does it relate to consumer perceptions of price increases during a crisis?

The 'dual-entitlement' principle suggests that consumers feel entitled to their regular transaction terms, while firms are entitled to their reference profits. During a crisis, if businesses raise prices due to increased costs (supply shocks), consumers are more likely to accept it because it aligns with the firm's entitlement to maintain profits. However, if prices increase solely due to rising demand, consumers perceive it as unfair because it violates their entitlement to regular transaction terms. The survey responses show people are more accepting of cost-justified increases than demand-driven increases.

Did the survey reveal any differences in how Americans and Israelis perceived price increases during the COVID-19 pandemic?

Yes, the survey indicated that Israelis generally viewed price increases as less acceptable than Americans. This could stem from a stronger cultural emphasis on price stability in Israel or a heightened sensitivity to perceived exploitation during crises. This highlights the importance of cultural context in shaping perceptions of fairness in pricing.

How did consumer perceptions of price increases vary depending on the type of product during the pandemic?

The survey found that for essential goods like hand sanitizer and toilet paper, a majority of respondents found price increases unacceptable regardless of the stated reason. This suggests that consumers have a lower tolerance for any form of price hike on items considered basic necessities during a crisis. This implies a moral dimension where raising prices on essentials is seen as particularly unethical.

What factors influence how consumers perceive price fairness, and how did these factors play out during the COVID-19 pandemic?

Consumer perceptions of price fairness are influenced by economic factors (supply and demand) and psychological factors (like the 'dual-entitlement' principle). During the pandemic, consumers were more accepting of price increases attributed to cost increases (supply shocks) than those blamed on rising demand. The survey also revealed that cultural context (US vs. Israel) and the type of product (essential vs. non-essential) significantly impacted perceptions of fairness. Transparency about cost increases and avoiding excessive price hikes on essential goods are critical for maintaining consumer trust.

Beyond supply and demand, what other considerations should businesses keep in mind to maintain consumer trust during a crisis when adjusting prices?

Businesses should be transparent about cost increases and avoid excessive price hikes on essential goods. Consumer trust is heavily influenced by psychological and ethical considerations, such as the 'dual-entitlement' principle, cultural context, and the nature of the product. A lack of transparency or the perception of exploitation can damage a business's reputation and erode consumer loyalty.