Jason Maynard has produced a thesis examining “The Effects of Anti-Price Gouging Legislation on Supply Chain Dynamics“:
Abstract: The purpose of this thesis is to model the effects of anti-price gouging (APG) legislation on the costs to businesses during the recovery period of a disaster. A system dynamics model of a business’s replenishment procedures is used to simulate the effects of APG legislation on business performance. Economists have published expansive research on the effects of price ceilings on supply and demand, but there is little research evidence on the operational consequences of price ceiling legislation on business costs. APG legislation increases consumer’s forward buying and shortage gaming after a disaster by removing price incentives to be frugal. Forward buying and shortage gaming are two key drivers of the demand variation and the bullwhip effect, which leads to increased inventory costs, misguided capacity expansion and reduced service levels. These costs have a negative impact on local businesses that are critical to a community’s economic health and recovery from a disaster. The simulation results from this thesis show that APG legislation is not an effective regulatory response to decrease the impact of disasters on affected communities.
If I were going for a sexier title, I would have called this post “The beer game and the bullwhip effect.” But that title is less descriptive unless you know that the beer game “is a common simulation of the dynamic effects of a supply chain” and the bullwhip effect is supply-chain phenomenon in which demand spikes get amplified up through the supply chain.