Our weekly SRI Seminar Series welcomes Nicola Lacetera, an applied economist and professor in the Department of Management at the University of Toronto, with cross-appointments to Economics and the Strategic Management area at Rotman School of Management. Lacetera is a faculty affiliate with the Schwartz Reisman Institute for Technology and Society, a research associate at the National Bureau of Economic Research, and a research fellow at CESifo, Behavioural Economics in Action at Rotman, U of T Centre for Ethics, the Institute of Management and Innovation, and the Canadian Centre for Health Economics. Lacetera’s research interests include the study of ethical constraints to markets, the motivations for altruistic behavior, and various topics in behavioral economics.
Talk title:
“Social support for markets and ‘just prices’”
Abstract:
Certain events, such as a surge in demand not accompanied with an expansion in supply, may lead companies to raise the price of goods or services. Recent examples include increases in the prices of facemasks, hand sanitizers, and certain medicines during the COVID19 pandemic. The diffusion of algorithmic pricing is likely to expand these real-time adjustments into many markets. However, higher prices are often considered morally unacceptable. Absent the social support for these practices, a market may unravel and companies may suffer reputational costs. Higher prices, however, might be necessary to incentivize greater supply, or reallocation of goods across geographical areas. These efficiency-morality dilemmas characterize many market-design and regulation choices.
We conducted randomized survey experiments with US and Canadian residents to study attitudes toward unregulated price changes in different markets, with a specific focus on whether and how people perceive and elaborate tradeoffs between competing values and goals. Participants expressed their views and preferences over scenarios where companies increase the prices of certain goods in particular circumstances and scenarios where public authorities prohibit these price increases. We manipulated the product of interest, the cause of the price increase, and the salience of tradeoffs between low prices and potential supply shortages.
Preliminary findings show a general opposition to unregulated pricing; however, making economic tradeoffs more salient significantly increase support for the free operating or markets without public intervention. Concerns about fairness to customers and equal access, as well as pre-existing ideological views about the role of markets in society, are strongly correlated with the support for or opposition to unregulated pricing. Moral and ideological factors play a larger role when less information about economic consequences of regulation or its absence is provided.
Suggested readings:
D. Kahneman, J.L. Knetsch, & R. Thaler. (1986). Fairness as a constraint on profit seeking: Entitlements in the market. The American economic review, 728-741.
J.J. Elias, N. Lacetera, & M. Macis. (2019). Paying for kidneys? A randomized survey and choice experiment. American Economic Review, 109(8), 2855-88.
A.E. Roth. (2007). Repugnance as a Constraint on Markets. Journal of Economic perspectives, 21(3), 37-58.
E. De Filippo, & E. De Angeli. (1950). Napoli milionaria!. G. Einaudi.
M. Bergen et al. 2021: How AI Can Help Companies Set Prices More Ethically, Harvard Business Review.
A. Turillazzi. 2021: The ethics of algorithmic pricing, Neos Magazine.
L. Vance. 2015: The Elusive Just Price, Future of Freedom Foundation.
About Nicola Lacetera
Nicola Lacetera is a professor of Management at the University of Toronto-Mississauga, with cross appointments to the Rotman School of Management and the Department of Economics. He is also a research associate at National Bureau of Economic Research, and a research fellow at CESifo, Behavioural Economics in Action at Rotman, Schwartz Reisman Institute for Technology and Society, U of T Centre for Ethics, the Institute of Management and Innovation, and the Canadian Centre for Health Economics. Lacetera’s research interests include the study of ethical constraints to markets, the motivations for altruistic behavior, and various topics in behavioral economics.
About the SRI Seminar Series
The SRI Seminar Series brings together the Schwartz Reisman community and beyond for a robust exchange of ideas that advance scholarship at the intersection of technology and society. Seminars are led by a leading or emerging scholar and feature extensive discussion.
Each week, a featured speaker will present for 45 minutes, followed by 45 minutes of discussion. Registered attendees will be emailed a Zoom link approximately one hour before the event begins. The event will be recorded and posted online.
Nicola Lacetera