Do consumers prefer price gouging to shortages?(econlib.org)
econlib.org
Do consumers prefer price gouging to shortages?
https://www.econlib.org/do-consumers-prefer-price-gouging/
13 comments
The latter would explain why the Grateful Dead sold their concert tickets via a lottery system.
Except the shortage lasts for mere moments, instead of as long as the causal disruption.
From the article:
"Price gouging is generally defined as a situation where companies set the price above the customary level in order to prevent shortages from occurring."
This is not the definition as far as I know.
This is not the definition as far as I know.
That sounds like normal supply and demand, not "price gouging". If you only have N of something, you set the price level such that the demand at that price will only be N of that thing.
But people feel it as price gouging. If the price has been X for a long time, and now the price is suddenly several times X because the supply got short, that feels like price gouging rather than "supply and demand".
But people feel it as price gouging. If the price has been X for a long time, and now the price is suddenly several times X because the supply got short, that feels like price gouging rather than "supply and demand".
I think it is perceived as a reasonable profit vs an unreasonable profit.
Well, but see, supply and demand works on both ends.
That is, I'm selling the thing that's in short supply. But why is it in short supply? Because if I'm the manufacturer, I can't make any more of them than I'm making. And if I'm the distributor, I can't sell any more than I can buy from the manufacturer.
And why can't the manufacturer make any more? Typically, because there's some resource that they can't get. So they get some more, but they get it by paying more for it.
So the point is, when the company selling you the widget raises their price, that isn't pure profit. Their costs went up too, because the price of what they need went up.
That is, I'm selling the thing that's in short supply. But why is it in short supply? Because if I'm the manufacturer, I can't make any more of them than I'm making. And if I'm the distributor, I can't sell any more than I can buy from the manufacturer.
And why can't the manufacturer make any more? Typically, because there's some resource that they can't get. So they get some more, but they get it by paying more for it.
So the point is, when the company selling you the widget raises their price, that isn't pure profit. Their costs went up too, because the price of what they need went up.
Show me an example of “gouging” in any market except those with government-controlled supply.
Surprise!
You can’t — because, it turns out, people enjoy providing goods and services at a profit, and will gleefully and immediately resolve the supply disruption that led to the “gouging”.
This topic is surprisingly robust, for something with so many obvious counter examples in such a wide range of scenarios…
Surprise!
You can’t — because, it turns out, people enjoy providing goods and services at a profit, and will gleefully and immediately resolve the supply disruption that led to the “gouging”.
This topic is surprisingly robust, for something with so many obvious counter examples in such a wide range of scenarios…
It’s almost as if opposition to free markets is based on ideology, not evidence.
Which is clearly impossible on a platform like HN, which values interesting facts above boring, religious ideology … right?
Which is clearly impossible on a platform like HN, which values interesting facts above boring, religious ideology … right?
Are you joking? Concert food and drinks and anything sold at an airport, for a start.
A private enterprise can charge whatever they like; you aren’t forced to visit and buy - go to a competitor that doesn’t charge as much! Or take your own alternative supply.
This is not even remotely an example of “gouging”.
Try again?
This is not even remotely an example of “gouging”.
Try again?
Ha ha ha. There are no competitors there with normal prices, how is something so obvious so elusive to you. You are just trolling with your "try again".
Hmmm.
No competitors, you say?
Peel back the layers of shielding against you rolling in as a “competitor”, and what will you find?
A big steaming layer of government.
Regulating that only their connected buddies can fleece you - and there’s nothing you can do about it.
You voted for this. For your safety. You want this.
No competitors, you say?
Peel back the layers of shielding against you rolling in as a “competitor”, and what will you find?
A big steaming layer of government.
Regulating that only their connected buddies can fleece you - and there’s nothing you can do about it.
You voted for this. For your safety. You want this.
Price gouging only benefits those who are relatively wealthy (and the sellers). To those who aren't, it's just a plain old shortage, but combined with having salt rubbed into that wound.