Tuesday, November 17, 2020
Governments often make public announcements that call into question oligopolistic behavior. Yet little is known about how firms respond to them. We study gasoline retailers' price responses to antitrust announcements shaming them for price gouging during the COVID-19 pandemic. Price effects are identified through a high-frequency event-study that leverages unique real-time station level price data and well-identified, discrete antitrust announcements. We find evidence of announcement effects that depend on firms' pre-announcement margins and hence exposure to being publicly shamed. Our results provide evidence against a "cheap talk" interpretation of government antitrust announcements.