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“Price gouging” is precisely the behavior that makes it economical to keep around extra stock in case of supply shocks. Negative public reaction to, and laws ag

by wyager 5y ago

“Price gouging” is precisely the behavior that makes it economical to keep around extra stock in case of supply shocks. Negative public reaction to, and laws against, “price gouging” is the reason almost no business chooses to absorb the cost of keeping around an extra reserve.

tablespoon 5y ago
> “Price gouging” is precisely the behavior that makes it economical to keep around extra stock in case of supply shocks. That idea doesn't hold a drop of water. If price gouging were legal, are you going to stockpile masks and sanitizer for a hundred years, so you're ready for the next gobal pandemic? Of course not: it's a dumb idea and you'd bankrupt yourself in storage fees and spoilage. Even an actual distributor wouldn't do that, given how short business time horizons are. What a smart price gouger would actually do is 1) make what they would have made otherwise, except collect higher profits, or 2) watch the news closely and rush out to try to buy up as much as they can before the general public acts, then sit outside the store they bought them from and scalp the goods at an exorbitant markup. Then they can satisfy their greed without wasting money on long term storage fees.
- wyager 5y ago
  > If price gouging were legal, are you going to stockpile masks and sanitizer for a hundred years, so you're ready for the next gobal pandemic? You’re not understanding the play here. All you need to do slightly increase the amount you keep in stock and reduce JIT delivery dependence. This increases your capital expenses a few percent and only pays off if you can occasionally make big money by drawing on your extra stock. You also seem to misunderstand the law - it’s not illegal anywhere in the US (afaik) for random people to stockpile and resell goods. It doesn’t matter, because that’s not really a viable distribution strategy. It is illegal in many states for stores to suddenly raise prices, and stores are the institutions who would actually be equipped to absorb demand shocks.

by wyager 5y ago

tablespoon 5y ago

> “Price gouging” is precisely the behavior that makes it economical to keep around extra stock in case of supply shocks. That idea doesn't hold a drop of water. If price gouging were legal, are you going to stockpile masks and sanitizer for a hundred years, so you're ready for the next gobal pandemic? Of course not: it's a dumb idea and you'd bankrupt yourself in storage fees and spoilage. Even an actual distributor wouldn't do that, given how short business time horizons are. What a smart price gouger would actually do is 1) make what they would have made otherwise, except collect higher profits, or 2) watch the news closely and rush out to try to buy up as much as they can before the general public acts, then sit outside the store they bought them from and scalp the goods at an exorbitant markup. Then they can satisfy their greed without wasting money on long term storage fees.

wyager 5y ago
> If price gouging were legal, are you going to stockpile masks and sanitizer for a hundred years, so you're ready for the next gobal pandemic? You’re not understanding the play here. All you need to do slightly increase the amount you keep in stock and reduce JIT delivery dependence. This increases your capital expenses a few percent and only pays off if you can occasionally make big money by drawing on your extra stock. You also seem to misunderstand the law - it’s not illegal anywhere in the US (afaik) for random people to stockpile and resell goods. It doesn’t matter, because that’s not really a viable distribution strategy. It is illegal in many states for stores to suddenly raise prices, and stores are the institutions who would actually be equipped to absorb demand shocks.