I could go today to Home Depot and buy a generator. Doing no comparisons between different suppliers, I can be fairly sure I'm paying a fair price. With no emergencies going on, generators are essentially a commodity. But during an emergency, supply becomes scarce in very specific areas. In such cases, I might go to Home Depot and pay triple what I'd pay at Lowe's, but without shopping around I don't know that. It's an emergency, and I don't have the time to shop around. Additionally, in that time maybe everyone runs out of generators. Gouging takes advantage of this. It sends the wrong price signals. A generator shortage in the Gulf Coast doesn't equate to a national shortage. But it might cost more to send a delivery truck off the normal schedule, and with the damaged infrastructure along the way there may be additional costs. Unable to raise the price, they don't ship them and people continue to go without.So, what's wrong with gouging?
Are there any negative consequences of prohibiting gouging?
This (along with a mistrust and distaste for meddling paternalism that often does more harm than good) is my main concern. If the generator supply is adequate, gougers have nothing to do. When demand spikes, gougers respond by increasing supply. I suggest that gougers discourage running out. If there's a hurricane coming and generators are priced as usual (the word "fair" is hard to pin down) I'll buy one for sure, and maybe two or three as backups. If batteries and milk are priced as usual, the shelves will be empty. If hotel rooms are at the regular rate, a large, affluent family will happily spread out into two rooms. If prices reflect the spike in demand, I'll reconsider, and maybe buy the smallest generator that I can get by with rather than one large enough to supply two houses. Higher prices provide incentive to use emergency goods more efficiently (while making black markets irrelevant).they don't ship them and people continue to go without
Additionally, in that time maybe everyone runs out of generators. Gouging takes advantage of this.
My suggestion is that gouging takes advantage of the entire scenario, that it takes advantage of people's fear of not getting it. I like to think existing profit margins should incentivize sellers to have enough. If they can't supply demand at the usual prices, who will fill the gap by gouging? If the battery and milk shelves are empty, they should be getting supply to fill them. If they're able to gouge, they're incentivized to create scarcity. While there can be arguments that other retailers will undercut attempts like that, I don't trust that they will. It doesn't take coordinated price fixing to see the dollars in making people afraid and in the store to buy generators, batteries, and milk. Have a healthy supply of them but only put a few out on display, triple the price, and keep restocking every fifteen minutes and they'd probably make out pretty good regardless of what other stores are doing.
This is purely a resource allocation problem, do you allocate resources randomly or do you allocate them based on need/demand. A person that needs to run a sump pump to prevent flooding is going to be way more likely to pay 3-4x for a generator than some who wants to watch football and have cold beer. If you put a price ceiling than it’s going to be random luck on who gets the generator and it won’t be assigned to where it does the most good. Some bleeding heart liberal will of course say that poor people live in lower areas, poor people are less likely to evacuate so poor people are being price gouged so it’s not fair. And yeah life’s not really fair but we don’t currently have a better way to distribute resources based on need. What will likely happen is that all the generators will either get bought by people that don’t need them or scalpers for the secondary market and the person that really needs one will either have to pay even more on the secondary market or not be able to get a generator at all and sustain huge avoidable losses. So instead of a shitty situation to the tune of $1000 for a overpriced generator someone might be out 50-100k in flood damage