6 ms·

Isn't price-gouging usually (and definitely in this context) about someone who bought an item at a standard wholesale price and is reselling it at a markup? Tha

by geofft 7y ago

Isn't price-gouging usually (and definitely in this context) about someone who bought an item at a standard wholesale price and is reselling it at a markup? That's not about the reward for producing it, that's about the reward for being in the right place at the right time. You can still try to argue that it's economically reasonable to reward people for being in the right place at the right time (to incentivize people to ship goods around etc.), but that's a very different argument from whether companies are able to fund increases of production.

whatshisface 7y ago
Well, from the perspective of the buyer it doesn't matter if you're buying it for 20x the price from CVS or from Joe Schmoe Markup Inc. It matters to CVS, but that's their problem.
- gpm 7y ago
  No, it matters to the buyer, and everyone else, because that one transaction doesn't exist in a vacuum. If the buyer is giving the factory an extra 19x the price, the factory is incentivized to produce more, the buyer is substantially more likely to be able to buy more then next time they want to. Averaged over society the buyer is much more likely to be able to buy whatever they need the next time they need to buy anything. If it's Joe Schmoe Markup Inc getting the extra 19x the price, there is no benefit to society or the buyer. Joe Schmoe is just an asshole profiting off of making other people worse off. That should be criminal.
- tracker1 7y ago
  If you're buying from retail and re-selling at over 4x the purchase cost, that's gouging... not even wholesale pricing, but retail.
- geofft 7y ago
  For the most part, CVS isn't producing it, they're reselling it. I agree it doesn't matter which reseller is gouging, but it does matter to me whether I'm paying a markup to someone who was clever enough to hoard important goods (and thereby incentivizing hoarding) or whether I'm paying for increased cost of production (and thereby incentivizing production). Markets are a way of managing information. That's why things like "the stock market went up" or "the stock market went down" matter: it communicates what people believe about whether things are underpriced or overpriced. In turn, those beliefs are only worth paying attention to if participants have some reasonable information about the things they're buying and selling. While my individual purchase of a $50 bottle of hand sanitizer is a small drop in a bucket of information, it is conveying information, and everyone else paying for it absolutely does influence the market. When we communicate that we're willing to pay $50 for a bottle of hand sanitizer even if the cost of production has not gone up, it tells resellers that they should start hoarding. A clever reseller will stop selling their reserves entirely and wait for discovered prices to max out. That does matter quite a bit to me as a buyer!
  - erik_seaberg 7y ago
    Maybe if the gouging limit were higher than 10%, CVS could have filled an extra warehouse with Charmin and Purell last year just in case.
mattlutze 7y ago
Price gouging is the supply side artificially raising prices significantly above normal to take advantage of a temporary imbalance in the anxiety vs actual threat being experienced by the demand side. The day congress declares war on Iran, if you significantly raise fuel prices at your gas station but the wholesale supply hasn't changed, you're generally trying to take advantage of the consumer's fear. We're for some reason cool with this in the financial markets, but for tangible consumer goods like food and fuel it's (rightly) considered predatory and criminally anti-social. Unchecked gouging can lead to real and dangerous social destabilization.
- syshum 7y ago
  While that is in fact the stated reason for the law against price gouging, that rarely happens in the real world What does end up happening is something (like a outbreak or natural disaster) causes a regional shortage of a good, which is often extended because there is no real incentive to divert goods to fill the shortage. Today that if often mitigated because of large national companies like CVS, Walmart, Lowes, Home Dept, etc who will move their supplies around based on normal prices But in some situations Mr. Bill that owns the local store may have an excess supply of Good X, and would be incentivized to move them to an area of shortage if the price was higher. With Price gouging laws he will not bother. Further Increasing in prices also in some ways allows for people with the greatest NEED for the items to actually get them, and discouraging hoarding.
  - mattlutze 7y ago
    Actually I took the gas price bit from specific experience and saw enough examples in a quiet Midwest area growing up to expect my experiences weren’t unique. The other issue is people, like in the article, just buying up a bunch of stuff so that other people literally can only buy from the opportunist. Consider the battle for concert tickets, which the band might sell for $20 but a scalper would buy and try to resell for $100. Yes it’s technically possible, but it’s fine for a society to determine it’s better for everyone if you’re not allowed to take advantage of people’s needs or vulnerabilities like that (when it comes to health supplies, for example).

by geofft 7y ago

whatshisface 7y ago

Well, from the perspective of the buyer it doesn't matter if you're buying it for 20x the price from CVS or from Joe Schmoe Markup Inc. It matters to CVS, but that's their problem.

gpm 7y ago
No, it matters to the buyer, and everyone else, because that one transaction doesn't exist in a vacuum. If the buyer is giving the factory an extra 19x the price, the factory is incentivized to produce more, the buyer is substantially more likely to be able to buy more then next time they want to. Averaged over society the buyer is much more likely to be able to buy whatever they need the next time they need to buy anything. If it's Joe Schmoe Markup Inc getting the extra 19x the price, there is no benefit to society or the buyer. Joe Schmoe is just an asshole profiting off of making other people worse off. That should be criminal.
tracker1 7y ago
If you're buying from retail and re-selling at over 4x the purchase cost, that's gouging... not even wholesale pricing, but retail.
geofft 7y ago
For the most part, CVS isn't producing it, they're reselling it. I agree it doesn't matter which reseller is gouging, but it does matter to me whether I'm paying a markup to someone who was clever enough to hoard important goods (and thereby incentivizing hoarding) or whether I'm paying for increased cost of production (and thereby incentivizing production). Markets are a way of managing information. That's why things like "the stock market went up" or "the stock market went down" matter: it communicates what people believe about whether things are underpriced or overpriced. In turn, those beliefs are only worth paying attention to if participants have some reasonable information about the things they're buying and selling. While my individual purchase of a $50 bottle of hand sanitizer is a small drop in a bucket of information, it is conveying information, and everyone else paying for it absolutely does influence the market. When we communicate that we're willing to pay $50 for a bottle of hand sanitizer even if the cost of production has not gone up, it tells resellers that they should start hoarding. A clever reseller will stop selling their reserves entirely and wait for discovered prices to max out. That does matter quite a bit to me as a buyer!
- erik_seaberg 7y ago
  Maybe if the gouging limit were higher than 10%, CVS could have filled an extra warehouse with Charmin and Purell last year just in case.

mattlutze 7y ago

Price gouging is the supply side artificially raising prices significantly above normal to take advantage of a temporary imbalance in the anxiety vs actual threat being experienced by the demand side. The day congress declares war on Iran, if you significantly raise fuel prices at your gas station but the wholesale supply hasn't changed, you're generally trying to take advantage of the consumer's fear. We're for some reason cool with this in the financial markets, but for tangible consumer goods like food and fuel it's (rightly) considered predatory and criminally anti-social. Unchecked gouging can lead to real and dangerous social destabilization.

syshum 7y ago
While that is in fact the stated reason for the law against price gouging, that rarely happens in the real world What does end up happening is something (like a outbreak or natural disaster) causes a regional shortage of a good, which is often extended because there is no real incentive to divert goods to fill the shortage. Today that if often mitigated because of large national companies like CVS, Walmart, Lowes, Home Dept, etc who will move their supplies around based on normal prices But in some situations Mr. Bill that owns the local store may have an excess supply of Good X, and would be incentivized to move them to an area of shortage if the price was higher. With Price gouging laws he will not bother. Further Increasing in prices also in some ways allows for people with the greatest NEED for the items to actually get them, and discouraging hoarding.
- mattlutze 7y ago
  Actually I took the gas price bit from specific experience and saw enough examples in a quiet Midwest area growing up to expect my experiences weren’t unique. The other issue is people, like in the article, just buying up a bunch of stuff so that other people literally can only buy from the opportunist. Consider the battle for concert tickets, which the band might sell for $20 but a scalper would buy and try to resell for $100. Yes it’s technically possible, but it’s fine for a society to determine it’s better for everyone if you’re not allowed to take advantage of people’s needs or vulnerabilities like that (when it comes to health supplies, for example).