Who’s Afraid of the Big Bad Price Gouger?

Until I started reading Micheal Giberson’s posts on price gouging, I had not given the subject of price gouging much thought.

The main question of debate is “Is it moral for a retailer to charge more for a product when demand surges due to outside circumstances?” A classic example is charging for snow shovels in a snowstorm. In a recent post, Micheal poses the question:

Consider two hardware stores: one prices snow shovels at $15 when there is no snow and at $20 when there is snow; the other maintains a fixed price for snow shovels under both no-snow and snow conditions. In equilibrium, the second store will carry a smaller inventory than the first and offer it a price between $15 and $20. Which pricing policy is more moral?

I have to say that I don’t have a ready answer. I’m tempted to think that both store owners are acting morally, and that morality rests not with the store owner, but with the snow shovel customer.

If the customer plans ahead and receives the low “no snowstorm” price, there is no reason to complain. After all, who ever complains about a sale?

If the customer does not plan ahead, and is forced to buy the $20 shovel from the first store because the second store has run out, whose fault is it? I place the fault squarely on the customer who did not plan ahead for a snowstorm, and if that customer subsequently complains about price gouging, that complaint seems immoral in my eyes.

I think it’s everyone’s right to not plan for disaster if the consequences fall only on themselves. But if they then complain because they are being taken advantage of in the vulnerable position they’ve put themselves in, I have no sympathy. Buyer morality grid

Put simply, the store owners are planning for the snowstorm, and willing to accept the consequences of their actions. Buyers may or may not plan ahead, but it’s only when they are not willing to accept the consequences of their actions that I consider them immoral.

The only circumstance in which I’d place any moral onus on the store owner is when the disaster could not be foreseen. In this case, neither store owner will have snow shovels on hand because there will have been no market for snow shovels before the storm, so the whole question is moot anyway.

On the other hand, if the disaster can be be foreseen, but the consequences of not planning fall on society as a whole, then those who oppose preparing for the disaster are immoral because they are forcing others to share in the consequences of their decision.

If you read this blog regularly, you can probably figure out which coming disaster I have in mind. Are you advocating preparation, or opposing it?

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