General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region Forumstodays idiot of the day
somehow price gouging is good????? and wall street wonders why they are so hated.
http://www.cnbc.com/id/49622944
unblock
(51,973 posts)the part of the problem that the article pays attention to is the resource allocation aspect. this is typical of an economist, particularly one of naive and/or narrow interests.
yes, if there is a shortage, it must be addressed somehow, and price discrimination is certainly one way, the approved all-american way of dealing with it. at least, an argument can be made that it's not particularly worse than other means (ignoring that it furthers a system where the rich are, as ever, favored).
however, the article completely ignores the seller's windfall. is there really some great principle involved in letting the merchant get an outsized profit simply for carrying ordinary goods when a disaster makes them more valuable? let me clarify -- the merchant will already make an outsized profit simply because at the usual prices, he will clear out his shelves. if he can quadruple prices, he will make absurdly more.
so even if the article is right that the prices should be set according to such market conditions, allowing gouging for the sake of reasonable resource allocation in a free market system, that doesn't mean the merchant should benefit from the windfall.
one solution to address the disparity would be let them gouge, but impose some sort of tax on those who chose to do so, and use those funds to help those in need during the crisis.
lo and behold, that sounds rather like the system we have, the one that the article complains about!
synapticwave
(52 posts)It's too bad the article didn't address this, but the argument would be (not my argument btw, I mostly agree with you) that in most cases where a merchant would be able to make a huge profit from price-gouging, it also means that the aftermath of the disaster prohibits them from opening and bringing in revenue for potentially a long period of time. Raking in profits for a 2 day period helps them buffer the lost cash flow they might see for months following a disaster, so they can still operate, pay their employees and quickly restock their shelves for returning victims.
unblock
(51,973 posts)one counter might be what makes merchants so special that they should have a large offset that most people don't have?
a more long-term point is that gouging is just rotten business. even if it makes "sense" in the short-run, it pisses customers off and they remember for a LONG time. whatever extra they get, whether it's windfall profit or just offsetting losses from supply interruptions later, customer resentment will cost them far more in the long run.
so, ethics aside, gouging still doesn't make sense for businesses with long-term customers. only tourist traps and travel-by places are likely to actually benefit from it in the long run.
DiverDave
(4,874 posts)and after it's 14.95, thats gouging.
A little bump? better, but what if,for good will and bigheartedness that folks will remember,
a DROP in price with an ad that tells them that we all are helping?
I can dream, I guess...