Wednesday, September 20, 2017

Hurricanes and price gouging (and watermelon)

Accusations of price gouging don't just concern food and water and plywood and gasoline: nowadays we evacuate by airplane as well. But last minute bookings are always expensive...

Airlines Face Criticism Amid Irma Price-Gouging Complaints
"Florida residents have been logging their compaints about unfair pricing of items like water and gasoline, along with airfares, with the office of Pam Bondi, the attorney general of Florida. There have been more than 7,000 since Monday, the attorney general said on Friday.
In their letter to Transportation Secretary Chao, Senators Blumenthal and Markey wrote:
“Airlines certainly have a right to a reasonable return for services rendered and vagaries in pricing are to be expected; but airlines have no right to impose exorbitant, unfair prices on Americans simply trying to get out of harm’s way.”
Florida Representative Charlie Crist also wrote a letter to Ms. Chao, calling for an investigation of United Airlines after receiving several complaints over airfare increases.
"“If there’s any gouge, it’s just the last minute walk-up airfares that are designed for desperate business fliers,” Mr. Hobica said. “It’s just the computer programs doing what they do when it’s last minute and seats are scarce.”
Delta, the target of the initial viral complaint, has denied changing its pricing structure leading up to Irma’s arrival and has capped its one-way fares out of South Florida at $399 through Sept. 13 (other airlines like JetBlue lowered one-way fares to as low as $99.) "
I've never been able to track down if it's a true story, but I've heard over the years of some hurricane in which people both lined up to buy some essential good at a very high price, and then clapped when the police showed up to arrest the purveyors for price gouging and confiscate the goods.
Stephanie Wang points me to this second or third hand account, where the good in question is ice.

They Clapped: Can Price-Gouging Laws Prohibit Scarcity?

Here are two recent articles, con and pro on raising prices in an emergency (they both have a picture of empty shelves...)

Memo to economists defending price gouging in a disaster: It's still wrong, morally and economically  by 

Price Gouging Can Be a Type of Hurricane Aid
Higher prices can help resources get to the people who need them most.
by Tyler Cowen

Of course, not all accusations of price gouging arise from emergencies. Consider the watermelon. The Jordan Times has the story:
Petra diner closed temporarily for ‘overpricing melon’  Photo of fat bill goes viral, triggers anger, mockery

"AMMAN — The Petra Development and Tourism Region Authority (PDTRA) on Wednesday decided to extend the closure of a tourist restaurant over an over-priced bill of a watermelon.

"A photo of the bill went viral on social media sites, triggering both angry reactions and mockery.

"PDTRA President Mohammad Nawafleh told The Jordan Times on Thursday that the restaurant, whose rent contract had already expired on July 15, will be closed for two months for selling a water melon for an unreasonably high price and serving food items that are not listed on its menu.
"Commenting on the issue, Tourism Expert Sami Hasanat said that such overpricing would harm the “already deteriorating” sector in the Kingdom.

"Authorities have to ensure that prices are always within the “reasonable” levels, as prices would affect the turnout of tourists, added Hasanat, a former MP."

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