Covid Economics: Policy Implications of Models of the Spread of Coronavirus: Perspectives and Opportunities for Economists

We test the theory that seller reputation moderates the effect of demand shocks on a seller's propensity to price gouge. From mid January to mid March 2020, 3M masks were priced 2.72 times higher than Amazon sold them in 2019. However, the difference (in price ratios) between a post-COVID-19 entrant and an established seller is estimated to be about 1.6 at times of maximum scarcity, that is, post-COVID-19 entrants price at approximately twice the level of established sellers. Similar results are obtained for Purell hand sanitizer. We also consider cumulative reviews as a measure of what a seller has to lose from damaging its reputation and, again, obtain similar results. Finally, we explore policy implications of our results.