Economics: The Value of "Price Gouging"

[SuburbanFarmer]

Don't have time to dig through 25 year old local newspaper articles, but it's true. You have to be there, I guess.

Here's one article about it. Some people had to pay *GASP* $100 for a $40 room due to price gouging. Maybe it's a typo though, and they meant to write $1,000?

https://news.google.com/newspapers?nid= ... 41,4194534

Opposite end of the state from Miami, and Gainesville is not exactly a tourist hotspot, as you should well know.

The fact that they still doubled the rates in spite of that should tell you something.

[Montegriffo]

The way I see it these UK hotels knew they were going to sell out their rooms so they put up the prices to line their pockets. They were not trying to ration rooms they are exploiting unfortunate people who can't get home.
You'd think they would just be happy with maximum occupancy mid week in February when they would normally be only half full.

[K@th]

One Christmas about a decade ago, people paid $5,000 for a $25 toy because it was in high demand. Tickle Me Elmo, FTW. Total price gouging.

[DBTrek]

The way I see it these UK hotels knew they were going to sell out their rooms so they put up the prices to line their pockets. They were not trying to ration rooms they are exploiting unfortunate people who can't get home.
You'd think they would just be happy with maximum occupancy mid week in February when they would normally be only half full.

Well Monte, if the demand for rooms were at normal mid-week February levels I'm sure the hotel prices would reflect that.

You understand the supply/demand curve . . . what happens when demand jumps by 10x while the supply remains static?

I'm curious, are you equally upset when the reverse happens? If supply outstrips demand by a tenfold and prices come crashing down, does that piss you off as well? If not, you should probably just make peace with the laws of supply and demand and not lament them.

[Speaker to Animals]

So nobody can respond to the simple fact that price gouging results in the opposite of efficient distribution of resources and, in fact, often results in a surplus of goods that deliberately do not get distributed because it maximizes profit when you corner supply.

LOL

[K@th]

So nobody can respond to the simple fact that price gouging results in the opposite of efficient distribution of resources and, in fact, often results in a surplus of goods that deliberately do not get distributed because it maximizes profit when you corner supply.

LOL

Still waiting for proof of these mostly empty $1,000 rooms during Andrew. The worst I could find was a $40 room going for $100.

[SuburbanFarmer]

Some recent fun...
http://www.nytimes.com/2004/08/18/us/hu ... price.html

She said she had heard from a man who said he was told that the new price for a small household generator was now $2,000, up from about $250.

Janet Snyder, a pharmacy technician in Cape Coral, said several men in two pickup trucks spotted her roof damage and offered to lay down a temporary covering of plastic sheeting. They wanted $600, about four times what she figured was the right price, based on 15 rolls of plastic that usually sell for $10 each

Mr. Lawrence, a cook who is studying to become a Web site designer, came across a gas station here in Orlando selling the equivalent of two $1 bags for $10.

In Plant City, just east of Tampa, Rosemary Duffield, who is in her 80's, decided she should get out of her mobile home and she booked a room a little farther inland, at the Crossroads Motor Lodge in Lakeland, she said in court papers. She was told the price would be $44.79, she said. But when she called to reconfirm later in the day, the price was $55.79. After checking in on Friday and settling into her room, she discovered that she had been charged $61.27.

In one of the boldest cases, some contractors from Jacksonville offered to clear two trees off the roof of an Orlando woman for $23,000, Mr. McMahon said. The woman declined the offer.

And a man with a chain saw told Jerry Olmstead that he could clear the oak tree off his roof, but it would cost $10,500.

[Speaker to Animals]

So nobody can respond to the simple fact that price gouging results in the opposite of efficient distribution of resources and, in fact, often results in a surplus of goods that deliberately do not get distributed because it maximizes profit when you corner supply.

LOL

Still waiting for proof of these mostly empty $1,000 rooms during Andrew. The worst I could find was a $40 room going for $100.

I gave you a logical example of why gouging results in supply NOT being distributed because it is cheaper to sit on a reserve and sell only a fraction at astronomical rates when you have supply cornered. This cannot be disputed. It's a simple economic fact of what happens when supply is cornered.

Your autistically screeching about $1000 rooms in the aftermath of Andrew is completely irrelevant to the point I made.

[DBTrek]

So nobody can respond to the simple fact that price gouging results in the opposite of efficient distribution of resources and, in fact, often results in a surplus of goods that deliberately do not get distributed because it maximizes profit when you corner supply.

LOL

I can respond to that - your assertions are unproven, while the law of supply/demand is well founded. A sudden increase in demand upon an unchanged supply drives prices higher. That’s normal, yet many people label this absolutely predictable price reaction as “gouging”.

State sponsored efforts to control or influence the law of supply/demand introduce economic inefficiencies and lead to worse outcomes than simply allowing supply/demand to guide price points.

[Montegriffo]

The way I see it these UK hotels knew they were going to sell out their rooms so they put up the prices to line their pockets. They were not trying to ration rooms they are exploiting unfortunate people who can't get home.
You'd think they would just be happy with maximum occupancy mid week in February when they would normally be only half full.

Well Monte, if the demand for rooms were at normal mid-week February levels I'm sure the hotel prices would reflect that.

You understand the supply/demand curve . . . what happens when demand jumps by 10x while the supply remains static?

I'm curious, are you equally upset when the reverse happens? If supply outstrips demand by a tenfold and prices come crashing down, does that piss you off as well? If not, you should probably just make peace with the laws of supply and demand and not lament them.

I guess it's the exploitation of the poor guys who have no choice because they can't get home because of the bad weather that is pissing me off.
I'm in the same situation myself tonight except my room is free.