4 ms·

What's the difference between price gouging and price increases due to shortages?

andi999 6y ago
Thats easy: if you are politically left leaning it is price gouging, if not then it is supply and demand.
jhayward 6y ago
Price gouging means you took stock on hand and re-priced it to gouge the desperate with no increase in cost to the seller. It also covers people who buy out the retail stock in 4 states to "corner" the supply, and then try to extort high prices for necessary goods due to an emergency. A price increase due to shortage is legitimate if it is new stock or production, brought online or made possible by a higher price that is now sought to satisfy demand.
- andi999 6y ago
  I also believe a price increase to prevent shortage is legitimate (or actually good). If demand goes up prices shd go up so the buyer themselves can prioritise (if desinfect prices hiked immediately (some ppl would call it price gouging) buyers might not empty the shelves or at least more ppl had the chance to get something. But this needs to be done with stock on hand.
  - jhayward 6y ago
    That's still price gouging, it merely re-allocates the supply from those that need it to those that can pay exorbitantly. It's not as though the wealthy have more legitimate need for the products.
    - andi999 6y ago
      It doesnt merely do that. If like one liter of desinfectant costs 200US, still everybody can afford it, but everybody will think twice (actually not thinks twice, but dismiss the idea) of buying more than one bottle.
ken 6y ago
IANAL (or economist), but I'd say price gouging is when hoarders raise prices to profit from artificial shortages that they created. As a people, we did not run low on hand sanitizer. As a free market, we ran low on hand sanitizer because a small minority decided they needed 10,000 bottles in their garage. When there exists plenty of product for everyone, and there are distribution networks by which we can get it to everyone who needs it, and yet opportunists insert themselves in the middle for no purpose other than to make a quick buck, I call that price gouging.
- javagram 6y ago
  I’m pretty sure we actually did run low on hand sanitizer. Yes, there were some hoarders, but people also started buying and using a lot more sanitizer, the supply chain was overwhelmed. Companies didn’t have huge excess warehouses of the stuff ready to ship when demand suddenly spiked over the period of a few days.
  - Raidion 6y ago
    I think he's referring to the feedback loop that hoarding causes. If you're confident you'll be able to buy the good in the future, you'll buy less now. If a hoarder clears out the supermarket, that means that everyone that shops at that supermarket and doesn't get what they want is more liable to make a larger purchase when do find it at another store. This chain reaction leads to shortages. It's impossible to prove the direct amount of causation (and of course organic demand spiked), but the relationship is clearly there.
    - chrischen 6y ago
      I think he's specifically referring to the hoarders being the cause of the price increase in the first place and profiting off of their hoarding (correct me if I'm wrong). But that's definitely not the case with most shortages of things like PPE and alcohol. Most people are calling any price increase gouging, to the point where sites like eBay have simply banned anyone from selling masks at marked up prices. However they grandfathered some pre-existing sellers. Ironically this created a monopoly situation that has constrained supply which by definition means ebay is price gouging (since they make a percentage based fee on sales). If they simply let new sellers "price gouge", it would flood the supply and naturally lower prices for things like masks on eBay.

Thats easy: if you are politically left leaning it is price gouging, if not then it is supply and demand.

Price gouging means you took stock on hand and re-priced it to gouge the desperate with no increase in cost to the seller. It also covers people who buy out the retail stock in 4 states to "corner" the supply, and then try to extort high prices for necessary goods due to an emergency. A price increase due to shortage is legitimate if it is new stock or production, brought online or made possible by a higher price that is now sought to satisfy demand.

andi999 6y ago
I also believe a price increase to prevent shortage is legitimate (or actually good). If demand goes up prices shd go up so the buyer themselves can prioritise (if desinfect prices hiked immediately (some ppl would call it price gouging) buyers might not empty the shelves or at least more ppl had the chance to get something. But this needs to be done with stock on hand.
- jhayward 6y ago
  That's still price gouging, it merely re-allocates the supply from those that need it to those that can pay exorbitantly. It's not as though the wealthy have more legitimate need for the products.
  - andi999 6y ago
    It doesnt merely do that. If like one liter of desinfectant costs 200US, still everybody can afford it, but everybody will think twice (actually not thinks twice, but dismiss the idea) of buying more than one bottle.

ken 6y ago

IANAL (or economist), but I'd say price gouging is when hoarders raise prices to profit from artificial shortages that they created. As a people, we did not run low on hand sanitizer. As a free market, we ran low on hand sanitizer because a small minority decided they needed 10,000 bottles in their garage. When there exists plenty of product for everyone, and there are distribution networks by which we can get it to everyone who needs it, and yet opportunists insert themselves in the middle for no purpose other than to make a quick buck, I call that price gouging.

javagram 6y ago
I’m pretty sure we actually did run low on hand sanitizer. Yes, there were some hoarders, but people also started buying and using a lot more sanitizer, the supply chain was overwhelmed. Companies didn’t have huge excess warehouses of the stuff ready to ship when demand suddenly spiked over the period of a few days.
- Raidion 6y ago
  I think he's referring to the feedback loop that hoarding causes. If you're confident you'll be able to buy the good in the future, you'll buy less now. If a hoarder clears out the supermarket, that means that everyone that shops at that supermarket and doesn't get what they want is more liable to make a larger purchase when do find it at another store. This chain reaction leads to shortages. It's impossible to prove the direct amount of causation (and of course organic demand spiked), but the relationship is clearly there.
  - chrischen 6y ago
    I think he's specifically referring to the hoarders being the cause of the price increase in the first place and profiting off of their hoarding (correct me if I'm wrong). But that's definitely not the case with most shortages of things like PPE and alcohol. Most people are calling any price increase gouging, to the point where sites like eBay have simply banned anyone from selling masks at marked up prices. However they grandfathered some pre-existing sellers. Ironically this created a monopoly situation that has constrained supply which by definition means ebay is price gouging (since they make a percentage based fee on sales). If they simply let new sellers "price gouge", it would flood the supply and naturally lower prices for things like masks on eBay.