To be specific, the market+price gouging laws+Amazon blocking listings because of those laws is suboptimal. If Amazon hadn't blocked the listings, and more to the point, if Amazon had been known to act reasonably in prior instances, then there'd be more investment and people would accept lower returns. I know firsthand people told me they weren't buying these stuff wholesale to sell on Amazon because they expected Amazon to cause issues, and they were right.

I think if there'd be no price gouging laws and everyone expected to be allowed to sell on Amazon, people would end up pricing lower and there'd be more supply and competition.

There's also uncertainty because when Amazon was banning for price gouging they never made it clear what price level counted as gouging. Wholesale prices shot up, and it was unclear whether selling at a reasonable margin, but based on a higher cost, would be considered gouging.