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LostInParadise's avatar

Is price gouging unethical?

Asked by LostInParadise (25328points) August 4th, 2010

After a disaster like a hurricane, it is common for those who sell necessities to raise their prices. It is easy to come down against these people,saying that they are making a bad situation worse. However, there is a defense for what they do. They can say that there is not enough to go around and that the price mechanism provides a way of adjusting supply and demand. In addition, high prices attract sellers from other places, helping to ease the crisis. I would not put the blame on sellers, but I would say that a policy of rationing would be a more equitable way of having the burden shared equally.

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12 Answers

El_Cadejo's avatar

I think its bullshit. I also get highly pissed off when i see this sort of thing at the movies, beach, amusement parks, etc. Like fuck you….. water doesnt magically cost 4 dollars now

TexasDude's avatar

John Stossel raises an interesting argument about this in his book Myths, Lies, and Downright Stupidity. Stossel claims that so-called price gouging during a disaster protects the consumer because it prevents people from buying valuable commodities in bulk and therefore lets more people have access to the things they need.

He uses batteries as an example. If batteries cost $2.00 a pack on an average day, they will sell at a regular rate. If they were still $2.00 a pack during a disaster, one individual could easily swoop in and buy out the entire stock, leaving no batteries for everyone else. If batteries rose (were “price gouged”) up to $10.00 a pack during a disaster, this would be less likely to happen. People that really need them will be willing to pay for them, despite the cost, and predatory buyers are less able to buy out the entire stock.

Also, you can’t force businesses to stay open during a disaster. If they don’t have a motivation to stay open during such times (higher profit margins) they would likely just up and leave (remember, businesses are not businesses out of the goodness and charity of their heart, they exist to make a profit) leaving nobody with the opportunity to get batteries, water, fuel, etc.

My conclusion, as well as Stossel’s? Price gouging can save lives.

john65pennington's avatar

I have a classic example, concerning your question. in 1998, Nashville had three terrific tornadoes that destroyed many homes, as well as part of the downtown area. my house was in the path of one of the tornados. many homes were left exposed to the elements of the weather. Home Depot came down my street, offering blue tarps at twice the original price. was this price gouging? yes, in its purest form. Home Depot knew we were desperate for the blue tarps, in order to protect our home furnishings inside. to cover our roofs. some people paid the price at the point of panic.

Shortly after this incident with Home Depot, next comes down our street a big truck from Loews. the workers were giving away the blue tarps absolutely free.

Today, this is why i never make a purchase at Home Depot. they were greedy.

JLeslie's avatar

After hurricanes in FL we are asked to report price gouging. I think it is unethical. I understand supply and demand, but since there is going to be huge demand, the vendor is going to make big money anyway. A reasonable increase in price I am ok with, but doubling and tripling is outrageous.

I thought about reporting Northwest airlines a couple of years ago for price gouging because their flight from Memphis to Gulfport MS (must be an hour flight) was never under $700 dollars round trip, even with weeks in advance. I find that to be an outrage. I am sure it is based on competition, or no competition, and mostly business people were going to the coast post Katrina.

perspicacious's avatar

Yes, and usually prohibited by law.

Pied_Pfeffer's avatar

Yes, I feel that price-gouging is unethical in cases of emergencies. The hotel corporation I worked for does not allow the hotels to increase their rates in these situations. Not only does it make for bad PR, but it just isn’t the right way to treat people in need.

ragingloli's avatar

If they wanted to make sure that someone does not buy all that is in stock and leaves nothing for others, they can limit the amount a single person can buy.
You know, putting up a sign that reads “only 10 packs of batteries per person” and enforce it at checkout. It is not that difficult.

Frenchfry's avatar

They do it with gas. But the government stepped in one year made it against the law. I live in a hurricane area.

Cruiser's avatar

It’s called supply and demand. The article by John Stossel that @Fiddle_Playing_Creole_Bastard cited is one way to “justify” the higher prices but it simply comes down to survival. That store owner is now faced with paying the same rent and overhead with perhaps 10% of the commodities he normally sells. Water, batteries, milk and bread stocks will certainly run out quickly but his rent and utility bills won’t. Cut them some slack or drive somewhere else to get your sale of the day.

Haleth's avatar

@ragingloli That’s true, but people could just send in their friends or family to buy ten more packs of batteries. Or if someone wanted to make a quick buck, you could pay them to go in and buy batteries for you. Anyone who was motivated enough to do this might just turn around and sell the batteries for a profit. The cashier would also have an incentive to let his friends and family get extra batteries, or he could be bribed.

ItsAHabit's avatar

The law of supply and demand is one that politicians try to outlaw for political advantage. In doing so they create unintended consequences. We experienced an historic ice storm and people were in great need of electrical generators. Roads were dangerous and virtually impassable. However, one man drove his truck over 100 miles to bring back generators which he sold at a good profit and his customers were very grateful. However, the state stepped in later and charged him with price gouging. Bull _ _ _ _ ! He had risked his safety and life to bring in vitally needed generators. The state sat by and let people freeze but punished someone who helped solve the problem.

JLeslie's avatar

@ItsAHabit He risked his life and should be paid more. That is different in my mind than running business as usual, and taking advantage of someone because you can. In business, I believe there is making a profit, and there is crossing a line to greed with no integrity. Back to an airline example. Let’s say a hurricane is coming so the airlines and trains increase their prices to get out of town, and hotels increase prices post hurricane. Only people with enough money can go. The airline makes money no matter what, but they take advantage of the situation. It is a grey line, hard to define, but I believe it exists. I say golden rule, treat others as you would want to be treated.

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