Price Gouging. Efficient Allocation Or Unconscionable???

[Ingomike]

We have had a couple of different threads that have had some discussion on price gouging. Dealers selling guns at market value above MSRP were called unethical and worse.

Markets Work! The absolutely best way to allocate a scarce resource is through the market. Walter Williams is the best at explaining how and why this works out for the best of all parties. Indiana has a gasoline price gouging law that applies when the governor declares an emergency. Williams explains why this sounds good but actually fails to make the situation better.

What I think would make gas available to those who really need it are rising prices. Suppose the pre-hurricane price of gas was $2.60 a gallon. As the hurricane approaches, dealers could let the price rise to $4 a gallon. That would give families who have enough gas to evacuate incentive to voluntarily forgo purchasing gasoline. Their voluntary decision would make more gas available for people who desperately need it. By the way, gas available at $4 a gallon seems more preferable than gas stations shut down because they have sold out of gas at $2.60 a gallon.


You might reluctantly agree that allowing prices to rise during a natural disaster helps allocate resources, but that's not the intention of sellers who raise prices. They are in it for windfall profit. I say: So what? It's what their actions accomplish that's important — namely, getting people to conserve during a natural disaster. Also, higher prices create incentives for suppliers of all kinds of goods — such as plywood, bottled water, generators and repair services — to pitch in to help to restore people's lives.

Suppose a New Jersey motel room rented for $125 a night prior to Hurricane Sandy’s devastation. When the hurricane hits, a husband, wife and their two youngsters might seek the comfort of renting two adjoining rooms. However, when they arrive at the motel, they find that rooms now rent for $250. At that price, they might decide to make do with one room. In my book, that would be wonderful. That decision would make a room available for another family who had to evacuate Sandy’s wrath.

New Jersey Gov. Chris Christie and others condemn this as price gouging, but I ask you: Which is preferable for a family seeking shelter — a room available at $250 or a room unavailable at the pre-hurricane price of $125? It’s not the intention of the motel owner to make a room available for another family. He just sees an opportunity to earn more money. It was not the intention of the family of four who made do with just one room to make a room available for another evacuating family. They are just trying to save money.

These principles hold in everyday markets as well. I thought during the ammo shortage that dealers were not charging much as the ammo was worth. Did that help or hurt shooters that wanted ammo? By dealers selling at lower than market value others learned delivery schedules, bought up ammo, to resell at market value online and through classifieds. Did that help the guy that wants 500 rounds for his kids to shoot. Nope, he couldn't get to the store to beat the resellers, he had to buy from resellers and likely paid more than if the dealer had priced it at market value and it certainly was not as convenient.

Same goes for guns themselves, I get it, the Python is a classic name many never thought they might even be able to own. How should the dealer allocate the Python to the number of buyers wanting it'?

Lots of reading with great examples of how this all works..

https://www.creators.com/read/walter-williams/10/18/price-gouging-during-a-natural-disaster

Price gouging ? Walter E. Williams

https://www.richmond.com/opinion/co...cle_38b62a0e-1aeb-59f1-892c-93fd1572789a.html

https://fee.org/articles/texas-price-gougers-are-hurricane-heroes/

 

[BehindBlueI's]

Are we going to pretend there's no difference between commodities, luxuries, and necessities?

What happens if you both limit price and limit purchases?

Say, gas is $2.80 but 10 gallons is all you can buy. Enough to evac, not enough to store and resell. Why is that not viable?

But let's talk specifically about the ammo crunch.

The model many retailers went to was something like a brick of .22 is still $18 but you can only buy two. Enough for shooters to shoot, not enough incentive for resellers to drive around buying up everyone's stocks. Does it help the shooting community to make ammunition harder to obtain for the masses? Does making the barrier to entry for new shooters higher hurt everyone's 2nd amendment rights long term? Well...duh. Screw the gougers, retailers or resellers both. They were working against you and your rights long term. If a new football was $500, do you think the number of football players might decline? The number of people interested in football might decline? The long term health of football as a sport would decline? Then why is shooting any different? Do you really think that the number of people who care about shooting doesn't affect the strength of the 2nd amendment?

Oh, you say, but you should have already stockpiled someone will say. Sure. If you're an old hand. We do want new people to become shooters, though, right? How exactly are they supposed to have a stockpile? Do you have a stockpile of parts for the car you might buy five years from now? Wow, what a lack of foresight on your part.



What happens when not everyone buys into the BS that price gouging is good and the market reacts after the disaster is over? Does it makes sense to get a windfall profit today if you lose customers long term?

 

[HoughMade]

...What happens when not everyone buys into the BS that price gouging is good and the market reacts after the disaster is over? Does it makes sense to get a windfall profit today if you lose customers long term?

That's what we would call "market forces".

 

[Ingomike]

.
What happens when not everyone buys into the BS that price gouging is good and the market reacts after the disaster is over? Does it makes sense to get a windfall profit today if you lose customers long term?

If dealers always sell for the market value all other parties must behave in accordance with the market, they have no other choice. Buyers can buy what they need at market price or choose not too.

If the dealer sells below market price then buyers often get no choice as resellers and hoarders buy up supply and there is nothing on the shelf. By selling at market price resellers and hoarders are priced out and the product is available to the public.

There is no known system to stop resellers and hoarders.

Is no .22 ammo on the shelf at $9 and plenty on Craigslist at $20 preferable to plenty on the shelf at $13-$17 at the dealer. What resellers will do for $11 they likely will not for $3-$7...

Markets really work...

 

[Knight Rider]

Free markets are the absolute best at allocating scarce resources. No other method comes close. Ultimately the customer sets the price, not the seller. It may not appear to be true at first blush, but that’s the reality.

 

[DoggyDaddy]

Free markets are the absolute best at allocating scarce resources. No other method comes close. Ultimately the customer sets the price, not the seller. It may not appear to be true at first blush, but that’s the reality.

Which is why, even to this day, you see people at gun shows trying to sell bricks of .22 ammo for 30 or 40 bucks. I hope they choke on it.

 

[Ingomike]

Which is why, even to this day, you see people at gun shows trying to sell bricks of .22 ammo for 30 or 40 bucks. I hope they choke on it.

Yep, they missed getting a chair before the music stopped.

 

[KJQ6945]

Price gouging is a made up liberal term, just like global warming, hate crimes, and common sense gun reform.

Getting supplies to the people that need them, is how shortages go away, and disasters are overcome. Simple supply and demand.

Liberal politicians always want to prolong the suffering and make laws against price gouging. The sheep cheer, because they think they are being saved. They are wrong and very short sighted.

 

[hoosierdoc]

Gas should cost $10/gal when hurricane hits. It stopd hoarding and ensures supply

Same with hotel rooms for evacuees

 

[KJQ6945]

Gas should cost $10/gal when hurricane hits. It stopd hoarding and ensures supply

Same with hotel rooms for evacuees

As the demand increases, so does the price. Unless you let a Democrat in charge. Then, you end up with no supply, due to laws that say the price of an item can’t be higher than the price before the disaster. Ask people in new jersey.

 

[two70]

What happens when not everyone buys into the BS that price gouging is good and the market reacts after the disaster is over?

There's no such thing as gouging. The buyer has free will to buy or not depending on their needs and can determine if their need is worth the cost or not. Artificially holding prices down during times when demand out runs supply only ensures that demand will remain high and supply will remain low for a prolonged period.

 

[Libertarian01]

In several of these examples the free market isn't pure. A hurricane is coming. This could well lead to a life/death situation. This is vastly different than some dudes wanting to get some plinking ammo for a Saturday shoot. If they don't get the ammo they do something else. If a family doesn't get gas or shelter from the hurricane they could die.

Try telling the ER when a loved one has been seriously injured you're not paying their prices, 'cause after all, you're the customer and you set the price, right? See how that would work out if they weren't forced by law to treat everyone.

It is true that as demand increases and supply is unable to keep up the price will increase, but there are other mitigating factors that can affect the situation. Life and death scenario's are one of these types of events. Now I am not saying that the price increases are wrong but I do believe that when the price increase tops a certain point it can cross moral or ethical boundaries. There has never been a truly "free" market. All systems of barter and trade have been governed since the dawn of time by social and cultural norms. Go to any civilization at any time in history that you want to and there will be certain protocols to follow, and certain actions that are unacceptable.

Going back to 1754BC the Code of Hammurabi says under Law 104, "If a merchant give an agent grain, wool, oil, or any other goods to transport, the agent shall give a receipt for the amount, and compensate the merchant therefore, he shall obtain a receipt from the merchant for the money that he gives the merchant." So whether the agent liked it or not, he was to "insure" the payment to the merchant even if there were issues with the commodity.

I'm not arguing against the free market at all. I believe it is a tremendous force for good. I think it is the one singular tool that could radically reduce the cost of health care in this country if it were forced upon it.

My only point is that the free market isn't the free market that we like to think it is. We cannot ignore that operating parallel with the free market is the concept of basic human decency, Christian charity, kindness, compassion, whatever you want to call it.

Regards,

Doug

 

[two70]

Gas should cost $10/gal when hurricane hits. It stopd hoarding and ensures supply

Same with hotel rooms for evacuees

My wife and I were in St. Augustine just before Irma hit the area in 2017 and I can assure you our primary concern was finding gas at any price, not finding the cheapest possible gas. When a hurricane is bearing down on you, availability becomes the overriding concern, price is hardly a consideration, and any sense of entitlement goes right out the window!

 

[femurphy77]

On 9/11 and 9/12 the gas station by me (when I lived out at Heritage lake) jacked their fuel prices to $4.50/gal from around 2.50/. The morons were lined up for 3/4 or a mile including my oldest. She bought into the panic just like all the other morons that bought every drop of gas that station had. Within a few days of the incident the owner announced that all fountain drinks would be free the rest of the year to make up for his bad judgement in raising the prices. I don't have a problem with this because it is stupid people allowing themselves to be taken advantage of just like the guys that paid 50 or 60 dollars for a brick of .22.

What irks me is the slime ball that will take advantage of a life or death situation and profit from it. I like to believe that Karma is truly a ***** and that one day they get their comeuppance.

Having said that I talked to the station owner a couple of months after things had settled down, he said he received a lot of static from his "regulars" over his price gouging. He laughingly told me that the profit he made from gas those two days would pay for free soft drinks for two years so all in all it was still a profitable venture for him.

I personally have witnessed the best in people during stressful times; I had the opportunity to have scheduled a visit with friends in New Orleans one year. Turns out a hurricane seemed to be tracking for their house so the ex freaked after being there less than 24 hours and insisted on leaving. It took us 4 hours to get to Baton Rouge a distance of about 90 miles IIRC. We stopped there for the night and the nice lady at the Holiday Inn charged us the regular rate for their last room so long as we were gone in the morning.

The damn hurricane ended up not coming close to New Orleans ruining what had promised to be a GREAT weekend.
​

 

[HoughMade]

2001? You had some crazy high gas prices back then....I mean $2.50....

Gas was well under $1.50 most places in Indiana for unleaded regular before 9/11/2001

 

[femurphy77]

2001? You had some crazy high gas prices back then....I mean $2.50....

Gas was well under $1.50 most places in Indiana for unleaded regular before 9/11/2001

It has been 19 years, the memories foggy about exact prices but they raised their price to well north of $4/gallon that day.

 

[Dirtebiker]

It has been 19 years, the memories foggy about exact prices but they raised their price to well north of $4/gallon that day.

Yep, $5 in Trafalgar on 9/11 afternoon.

 

[femurphy77]

Yep, $5 in Trafalgar on 9/11 afternoon.

I tried to explain to my oldest that people were just panic buying and she shouldn't be buying any gas that day unless she NEEDED it but as I'm sure you're aware you can't tell a teenager anything! The sad part is she was *****ing right alongside all the other idiots a couple of days later because the station had raised its price. I tried to tell her that between the motorhome, boat and the lawnmower gas we had on hand that we had well over 100 gallons available if needed but no-o-o-o-o-o-o-o!