Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?
This is your opportunity to ask questions. No question too simple or too silly.
Culture war topics are accepted, and proposals for a better intro post are appreciated.
Jump in the discussion.
No email address required.
Notes -
What is "price gouging"?
I hear it a lot lately, specifically as something that grocery stores are doing with food prices.
My instinct is that if retailers raises prices, even if only because they think customers will pay more, and then customers do pay more, then that is the new market price. As such, there can't really be "gouging" by definition, no matter what price retailers set.
As others said, in general price gouging is using supply shock or other emergency to increase prices dramatically. Especially if the supply shock is manufactured. One example in history is that of ultrarich Roman patrician Lucius Licinius Crassus, who got monopoly with his slave fire brigade and if building was on fire he offered the owner to buy it for low price and only if the owner sold did the firefighters extinguish the fire. This was the main source of his immense wealth. Of course Rome being what it was, Crassus's monopoly was enforced with underhanded tactics. Another example from modern times would be taking unconscious person to expensive hospital.
In my old extremely "free market" phase I was against any price gouging legislature with classic "better to have something for high price than nothing in crisis" , however now I think that threat of price controls may prevent creating artificial supply shock or monopolization of the market if one thinks of it as repeated game. Also monopolization of the market actually may result in monopolists selling less goods and keeping some in his storage, in order to maximize profit thus creating deadweight loss. Setting price controls for such a situation can actually result in monopolist still being profitable simultaneously with larger supply and consumer surplus. Incentivizing monopolization is even more destructive if you have more monopolies especially in essential intermediary goods such as electricity or basic infrastructure, which can lead to serious economic problem of Double Marginalization.
More options
Context Copy link
More options
Context Copy link