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Thread: Price gouging

  1. #41
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    [QUOTE=2foolish197;2832589]ok, who granted you the property? did you buy it from someone? did you fill out any government requirements and forms?[/QUOTE]

    This is a good point -- you also have to follow-up with an understanding of what is protected in the constitution: life liberty and property ...without due process of law. Property can be taken away, just not without due process.

  2. #42
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    [QUOTE=BushyTheBeaver;2832458]There's a difference between price going up due to normal supply and demand and price gouging.

    Scenario 1: Your house is heated by natural gas. Due to a scarcity, the cost of natural gas goes up. So your gas company raises your rates accordingly. This is not gouging.

    Scenario 2: Your house is heated by natural gas. There is no change in the supply or cost of natural gas. But in January the gas company increases your rates 50%, because they know that it's winter and you basically have no choice but to pay. This is price gouging.[/QUOTE]
    1: Supply went down. Prices increased.

    2: Demand went up. Prices increased.

  3. #43
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    [QUOTE=2foolish197;2832589]ok, who granted you the property? did you buy it from someone? did you fill out any government requirements and forms?[/QUOTE]

    The state does not give me rights. It only chooses to recognize or not recognize my rights. But inherently, I still have those rights. But in general, it's reasonable to assume that I probably bought it from someone.

  4. #44
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    [QUOTE=fukushimajin;2832572]It was a surprise to me too friend, but a huge part of our legal system is based on terms such as "reasonable", "unconscionable", "knowingly" and "good-faith" -- this runs through both civil law and criminal law. Ultimately that's why juries are so important and why lawyers good at making arguments to juries are so well paid.

    Remember, to be convicted of this crime, a jury of 12 individual consciences ALL have to be shocked -- that is a pretty high standard to reach.[/QUOTE]

    Since it's regarding price, it should be more specific. A vendor has no idea if he's gouging or not.

  5. #45
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    [QUOTE=Lawyers, Guns and Money;2832216]the problem with this logic is as follows.

    If we were out of water for some indefinite period of time (or even a definite period of time,) people would hoard water for future use. In fact, in your scenario where price does not increase, people have no incentive to cut their consumption of water in would hoard water and use it inefficiently. Only the first few customers who went to the store to get water would have access to it since the local supply would run out as the stores inventory would be depleted.

    Price is a very efficient tool to make sure resources are directed to their most productive/essential uses[/QUOTE]

    You need to limit quantities as well in an emergency situation.

  6. #46
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    Originally Posted by BushyTheBeaver
    There's a difference between price going up due to normal supply and demand and price gouging.

    Scenario 1: Your house is heated by natural gas. Due to a scarcity, the cost of natural gas goes up. So your gas company raises your rates accordingly. This is not gouging.

    Scenario 2: Your house is heated by natural gas. There is no change in the supply or cost of natural gas. But in January the gas company increases your rates 50%, because they know that it's winter and you basically have no choice but to pay. This is price gouging[QUOTE=BrooklynBound;2832998]1: Supply went down. Prices increased.

    2: Demand went up. Prices increased.[/QUOTE]

    I think to take his example further. In Scenario 2 if there is no competion and the unit price of gas goes up in January resulting in higher gross margins (not profits) for this period. I would consider this gouging. You can apply the doctor in restaurant scenario used in an earlier example.

    With healthy competition its hard to put this label on Exxon. Also have to laugh at the term "record profits" being thrown around. --this is what this thread is about, isnt it?

  7. #47
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    [QUOTE=sect112row36;2833030]Originally Posted by BushyTheBeaver
    There's a difference between price going up due to normal supply and demand and price gouging.

    Scenario 1: Your house is heated by natural gas. Due to a scarcity, the cost of natural gas goes up. So your gas company raises your rates accordingly. This is not gouging.

    Scenario 2: Your house is heated by natural gas. There is no change in the supply or cost of natural gas. But in January the gas company increases your rates 50%, because they know that it's winter and you basically have no choice but to pay. This is price gouging

    I think to take his example further. In Scenario 2 if there is no competion and the unit price of gas goes up in January resulting in higher gross margins (not profits) for this period. I would consider this gouging. You can apply the doctor in restaurant scenario used in an earlier example.

    With healthy competition its hard to put this label on Exxon. Also have to laugh at the term "record profits" being thrown around. --this is what this thread is about, isnt it?[/QUOTE]
    In #2, yes, gross margins would go up. What's wrong with that? Prices aren't determined by cost, they are determined by supply and demand. If the prices is too high, the vendor can't sell. He wants to sell -- just maybe not at the price you want to buy it for.

    I find it interesting that people think high prices when supply is low is wrong. But they're fine with customers demanding below market priced goods through force of the government.

    And no, it's not about Exxon. Record profits? That's fine. They made their profits through voluntary exchange. I may not like the price of gas, but it's still worth it for me to buy it. If it wasn't, I wouldn't buy it.

  8. #48
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    [QUOTE=BrooklynBound;2833004]Since it's regarding price, it should be more specific. A vendor has no idea if he's gouging or not.[/QUOTE]

    I think the rule for a vendor is the simplest of all: don't raise your prices during an emergency.

    If they can justify an increase because they faced wholesale cose increases they have nothing to worry about.

  9. #49
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    [QUOTE=fukushimajin;2834277]I think the rule for a vendor is the simplest of all: don't raise your prices during an emergency.

    If they can justify an increase because they faced wholesale cose increases they have nothing to worry about.[/QUOTE]

    If supply goes down, prices should be raised. Price has never been about cost, it's about where supply meets demand.

  10. #50
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    [QUOTE=BrooklynBound;2834509]If supply goes down, prices should be raised. Price has never been about cost, it's about where supply meets demand.[/QUOTE]

    Brook, simple question: do you never feel prices are out of line?

  11. #51
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    [QUOTE=BushyTheBeaver;2834513]Brook, simple question: do you never feel prices are out of line?[/QUOTE]Why would they be? By definition, a price is a value that two parties will voluntarily exchange at. If the price is too high or too low, an exchange will not happen and it's not actually a price, just a wish.

  12. #52
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    [QUOTE=BrooklynBound;2834514]Why would they be? By definition, a price is a value that two parties will voluntarily exchange at. If the price is too high or too low, an exchange will not happen and it's not actually a price, just a wish.[/QUOTE]

    So to you the fact that at big sporting events most real fans are squeezed out by celebrities and corporate sponsored tickets, to you this is a good thing.

  13. #53
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    [QUOTE=BushyTheBeaver;2834516]So to you the fact that at big sporting events most real fans are squeezed out by celebrities and corporate sponsored tickets, to you this is a good thing.[/QUOTE]

    Neither good nor bad.

  14. #54
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    [QUOTE=BrooklynBound;2834527]Neither good nor bad.[/QUOTE]

    Slut position.

  15. #55
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    [QUOTE=BushyTheBeaver;2834529]Slut position.[/QUOTE]

    Not at all. It's the market. Prices are what people are willing to pay for something. It is what it is.

  16. #56
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    [QUOTE=BrooklynBound;2834531]Not at all. It's the market. Prices are what people are willing to pay for something. It is what it is.[/QUOTE]

    I know. The BBB says that about plumbers all the time.

  17. #57
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    [QUOTE=Lawyers, Guns and Money;2832216]the problem with this logic is as follows.

    If we were out of water for some indefinite period of time (or even a definite period of time,) people would hoard water for future use. In fact, in your scenario where price does not increase, people have no incentive to cut their consumption of water in would hoard water and use it inefficiently. Only the first few customers who went to the store to get water would have access to it since the local supply would run out as the stores inventory would be depleted.

    Price is a very efficient tool to make sure resources are directed to their most productive/essential uses[/QUOTE]

    Huh? First of all, vertical demand for essential commodities forces regulation. That's why we have erected publically regulated utilities. Secondly, our government has chosen to make available increased resources for those in poverty to purchase essentials. They have not attempted to regulate prices for the most part (milk being one exception). Our Constitution contains an eminent domain clause as well as a general welfare clause. The founders were not darwinian capitalists. They were socially conscious and well understood the notion of "common good." Finally, your hypothetical is severely flawed. In a crisis, the playing field is hardly level and therefore the free market theory collapses swiftly in the absence of regulation of supply. In above scenario, absent regulation, water seller raises his price on limited quantity to the highest price the richest purchasers can bear. This is a closed market in the moment. Rich guy buys up ALL the water at astronomical price (it doesn't preserve any distribution or efficiency at all) and goes on to hoard it in his compound. Everybody else looks for a cactus to drain. That would not be my idea of price directing resources to their most efficient and productive uses. It would be an example of the trenendous inequalities in wealth driving societal inequalities. Not a world I personally want to live in. Nor did the founders.

  18. #58
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    [QUOTE=BrooklynBound;2834509]If supply goes down, prices should be raised. Price has never been about cost, it's about where supply meets demand.[/QUOTE]

    Supply and demand are meant to apply to markets as a whole not market segments facing an external crisis. If, for example, a store owner in a small town rural decided to buy up all the trucking companies and, for a period of time decided to create an artificial shortage of necessities and jack up prices should this be allowed? Sure, someone else would eventually be able to compete with the guy but should the short-term behavior go unpunished?

  19. #59
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    [QUOTE=fukushimajin;2835008]Supply and demand are meant to apply to markets as a whole not market segments facing an external crisis. [/QUOTE]

    Says who?

  20. #60
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    [QUOTE=BrooklynBound;2835013]Says who?[/QUOTE]

    Well according to classical economists like Adam Smith the market is based on certain assumptions


    1. Utility maximization (opportunism).
    2. Perfect rationality (Strong-form rationality).
    3. Firms maximize profit (Strong-form efficiency).
    4. Preferences are transitive and stable.
    5. Perfect competition (Price taking agents).
    6. Perfect information.
    7. Certainty.
    8. No externalities (e.g. no pollution, no network externalities, no look-ins).
    9. No asset specificity i.e. no quasi rents.
    10. No public goods.
    11. Separability of production.
    12. No economics of scale and scope.
    13. No connectedness of exchange.
    14. No distortions (e.g. taxes).
    15. Homogeneous goods.
    16. No direct transaction cost.
    17. All property is privately held.
    18. Human capital can be sold (Slavery is legal).
    19. All assets are priced and traded in markets.
    20. All utility can be measured in pecuniary terms.
    21. No measurement problems.
    22. No crime or war and litigation is does not cost anything.
    23. Time is static.
    24. All exchange is voluntary.

    This list is hardly exhaustive but it gets at the point: at a minimum, price gouging violates #5 and possibly #24.

    Also, no response to the hypothetical?

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