Willingness‑to‑Pay Misallocates Essentials

When prices spike for essential goods, who can 'afford' the good often reflects wealth, not marginal welfare: detailed Fed data on a March gas‑price shock show rich households kept consumption while poorer households cut back and still faced larger bills. That pattern undermines the textbook idea that willingness to pay allocates goods to those who value them most and suggests price signals can worsen welfare inequality for basics. — If willingness to pay fails as a proxy for social value in essential markets, policymakers must consider distributional and liquidity constraints when relying on market prices to allocate scarce necessities.