Economics at the Pump

Document Type

Article

Publication Date

2004

Abstract

Policymakers are often tempted to implement various new laws and regulations intended to prevent gasoline price gouging. We recently carried out economic experiments to test such anti-gouging measures as mandated divorcement and uniform pricing, and we found that those regulations actually harm consumers rather than help them. The reason is simple: The well-meaning interventions are designed to manipulate market allocations, but they backfire because they cannot account for the complex incentives in an intricate industry. Changing the rules alters the behavior of refiners and station owners, which is why the legislation does not have its intended effect on market outcomes.

Comments

This article was originally published in Regulation, volume 27, issue 1, in 2004.

Peer Reviewed

1

Copyright

Cato Institute

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