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.) "

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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?

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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 Michael Hiltzik

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

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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."

Price gouging during the pandemic: NY law revised and enforced

 Here's the press release from the office of the Attorney General of New York:

Attorney General James Stops Three Amazon Sellers from Price Gouging Hand Sanitizer and Recoups Funds for New Yorkers:  Sellers to Pay More Than $52,000 in Penalties and Nearly $23,000 in Consumer Restitution--AG James Reminds Sellers Price Gouging is Unlawful During Pandemic

"New York Attorney General Letitia James today announced that she has stopped three Amazon sellers from price gouging hand sanitizer during the coronavirus disease 2019 (COVID-19) public health crisis, and that she will help deliver tens of thousands of dollars back into the pockets of defrauded New Yorkers. Three sellers — Yvette Chaya d/b/a Northwest-Lux (Northwest-Lux), Mobile Rush, Inc. d/b/a Best_Deals_27 (Mobile Rush), and EMC Group, Inc. d/b/a Supreme Suppliers (EMC) — will pay the state of New York more than $52,000 in penalties and reimburse consumers almost $23,000 for overcharging for hand sanitizer during the pandemic.

“Price gouging on necessary consumer supplies during an unprecedented public health emergency is absolutely unconscionable and will not be tolerated,” said Attorney General James. “Instead of ensuring individuals could protect themselves from the coronavirus, these businesses operated with dirty hands by charging exorbitant prices on hand sanitizer and other cleansing products. My office will continue to clean up this unlawful practice by using all of the tools at our disposal to prevent price gouging during this pandemic.

...

"The OAG has already issued more than 1,800 cease-and-desist orders to businesses that stand accused of violating New York’s price gouging law. 

...

"Sellers should be aware that New York revised its price gouging statute, effective June 6, 2020, to impose increased penalties against those who price gouge essential items during a pandemic."

Price gouging

Michael Giberson at Knowledge Problem offers an extended discussion of price gouging. Here is the most recent entry: Predictable consequences of anti-price gouging laws.

Here are some of the earlier posts in that discussion:
Price gouging policy as rendered in everyday politics
Price gouging and behavioral economics – more work needed
Price gouging: Is it wrong? Should it be against the law?

Price gouging seems to me to be a special class of repugnant transactions, repugnant not because money is involved, but because too much money is involved. (Special, but not unique. Recall the $10,000 upper limit in yesterday's post.)

Eduardo Laguna Müggenburg explores the repugnance of price gouging, and defends his dissertation

 Eduardo Laguna successfully defended his Ph.D. dissertation last month. One of the papers he presented  (with Justin Holz and Rafael Jiménez-Duran) was an online experiment in which Amazon sellers of face masks and sanitizer at high prices were sampled, and subjects in the experiment were offered the opportunity to pay to have items be purchased from those sellers and donated to hospitals, and also to pay to have those sellers reported as price gougers to the  Department of Justice National Center for Disaster Fraud.  Some subjects were willing to buy, some were willing to pay to report, and some were willing to pay to avoid having sellers reported.

Here's the paper 

Quantifying repugnance to price gouging with an incentivized reporting experiment 

by Justin Holz, Rafael Jiménez-Duran and Eduardo Laguna-Müggenburg

Abstract: "Anti-price gouging laws are ubiquitous and people take costly actions to report violators to law-enforcement agencies, which suggests that they value punishing price increases during emergencies. We argue with a model that consumer reports contain information about repugnance to price gouging, or willingness to prevent third-party transactions (Roth, 2007). We conduct a field experiment during the first wave of COVID-19 to measure individuals’ willingness to pay to report sellers who increase prices of personal protective equipment. The willingness to pay to report is non-negligible, polarized, and responsive to the seller's price. We also find that repugnance is partly due to distaste for seller profits, depending on the product."

Remarkably, "Half of subjects who are willing to pay to report sellers are also willing to forgo the $5 gift card to have us donate PPE from a price-gouging seller."

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That is, there are substantial numbers of participants who are willing to pay to report the seller, but are also willing to pay for the experimenters to purchase from the seller and donate the PPE to a hospital.  

We often think of repugnance as partitioning the population—there are people who want to transact, and others who think the transaction shouldn’t happen.  The fact that some individuals can simultaneously have both these feelings is, I think,  one of the most striking results of this experiment—it shows just how complex repugnance can be. These are people who recognize that buying goods at inflated prices (and donating them to hospitals) may be efficient, and worth doing given the shortage,  but would still like to see the sellers fined or jailed.  

I'm reminded of this (third hand) story about a N. Carolina hurricane, in which people waiting in line to buy ice at high prices nevertheless applauded when police arrived to arrest the sellers for price gouging... They Clapped: Can Price-Gouging Laws Prohibit Scarcity?

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    Here's a picture from Eduardo's dissertation defense, conducted over Zoom:

Top: Matt Jackson, Eduardo Laguna, Al Roth

   Bottom: Larry Goulder, Chenzi Xu, Melanie Morten

Welcome to the club, Eduardo.

Hoarding and price gouging during Corona troubles

It appears we now have a Federal price gouging law.
Bloomberg has the story:

Accused New York Mask Hoarder Is First Charged Under Defense Act
By Patricia Hurtado

"In response to the Covid-19 pandemic, President Donald Trump on March 18 issued an executive order making it illegal to hoard medical supplies and devices which the U.S. has designated as scarce or sell them at excessive prices.
...
"Singh sold three-ply disposable face masks for $1 each, after having bought them for 7 cents -- a markup of about 1,328% -- Donoghue said, citing records seized from the store. Bulk sales were made to organizations serving vulnerable senior citizens and children battling the virus, according to the records.

"Singh “saw the devastating Covid-19 pandemic as an opportunity to make illegal profits on needed personal protective equipment,” said Craig Carpenito, the U.S. Attorney for the Eastern District of New Jersey who also heads the U.S. Department of Justice’s Covid-19 Hoarding and Price Gouging Task Force.

"U.S. postal inspectors seized 23 shipping pallets containing more than 100,000 face masks, 10,000 surgical gowns, 2,500 full-body isolation suits and more than 500,000 pairs of disposable gloves at Singh’s warehouse."
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And many states have had price gouging laws on the books for a long time. Here's a story from the WSJ:

Texas Attorney General Accuses Largest U.S. Egg Producer of Price-Gouging
Lawsuit alleges Cal-Maine Foods sold eggs at over 300% of their normal cost in coronavirus pandemic      By Rebecca Davis O’Brien

"The lawsuit shows the concern among law-enforcement officials and consumer-protection authorities over price-gouging on essential goods during the pandemic.
...
"Before the pandemic, between December 2019 and February 2020, Cal-Maine’s prices in Texas were around $1.02 for generic eggs and $1.89 for specialty eggs, according to the lawsuit.

"According to the lawsuit, as of 2015, Cal-Maine operated more than 90% of the largest egg-processing facilities in Texas. Nationally, Cal-Maine is the largest producer and marketer of shell eggs in the U.S., with a 19% overall market share, the lawsuit alleges, citing company statements.

"According to the lawsuit, Cal-Maine’s price jumps weren’t justified because its egg supply wasn’t affected—the company has said its facilities have been fully operational, with no disruptions to delivery or its supply chain. “During this pandemic, neither production costs nor contractual obligations forced Cal-Maine to charge exorbitant prices,” the lawsuit alleges.

"The lawsuit also alleges that Cal-Maine has misled the public about its egg prices, citing an April entry on the company website stating that “wholesale shell egg market prices…are outside of our control.” In fact, the attorney general alleges, there is no egg-market exchange, and Cal-Maine can exert control over prices."

Hoarding, price gouging, and backlash in the time of corona virus--updated

The NY Times has the story (followed by an update):

He Has 17,700 Bottles of Hand Sanitizer and Nowhere to Sell Them
Amazon cracked down on coronavirus price gouging. Now, some sellers are holding stockpiles of sanitizer and masks.
By Jack Nicas

"On March 1, the day after the first coronavirus death in the United States was announced, brothers Matt and Noah Colvin set out in a silver S.U.V. to pick up some hand sanitizer. Driving around Chattanooga, Tenn., they hit a Dollar Tree, then a Walmart, a Staples and a Home Depot. At each store, they cleaned out the shelves.

"Over the next three days, Noah Colvin took a 1,300-mile road trip across Tennessee and into Kentucky, filling a U-Haul truck with thousands of bottles of hand sanitizer and thousands of packs of antibacterial wipes, mostly from “little hole-in-the-wall dollar stores in the backwoods,” his brother said. “The major metro areas were cleaned out.”

...

"Mr. Colvin said he had posted 300 bottles of hand sanitizer and immediately sold them all for between $8 and $70 each, multiples higher than what he had bought them for. To him, “it was crazy money.” To many others, it was profiteering from a pandemic.

"The next day, Amazon pulled his items and thousands of other listings for sanitizer, wipes and face masks. The company suspended some of the sellers behind the listings and warned many others that if they kept running up prices, they’d lose their accounts. EBay soon followed with even stricter measures, prohibiting any U.S. sales of masks or sanitizer.
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And here's the update:

The Man With 17,700 Bottles of Hand Sanitizer Just Donated Them
A Tennessee man had planned to sell his stockpile at marked-up prices online. Now he is under investigation for price gouging.

"On Sunday, Amazon and eBay suspended him as a seller, which is how he has made his living for years. The company where he rented a storage unit kicked him out. And the Tennessee attorney general’s office sent him a cease-and-desist letter and opened an investigation.

“We will not tolerate price gouging in this time of exceptional need, and we will take aggressive action to stop it,” Attorney General Herbert H. Slatery III of Tennessee said in a news release.

"Tennessee’s price-gouging law prohibits charging “grossly excessive” prices for a variety of items, including food, gas and medical supplies, after the governor declares a state of emergency. The state can fine people up to $1,000 a violation."
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Here are all my posts on price gouging

Price gouging and proposed legal remedies

Some more interesting posts on price gouging from Michael Giberson at Knowledge Problem :

A private right of action on price gouging and Price gouging in Haiti.

31 States have laws against price gouging

So reports Michael Giberson at KP, based on a Master's thesis by Cale Wren Davis, supervised by Randy Rucker at Montana State. The thesis is here: AN ANALYSIS OF THE ENACTMENT OF ANTI-PRICE GOUGING LAWS.

I'm struck by how relatively recent anti price gouging laws are: 27 of the 31 were passed in the 1990s or 2000s, with the rest passed in 1979 (NY), 1983 (HI), 1986 (CT), and 1986 (MS).

The laws come into force when some kind of state of emergency has been declared, and most set a price ceiling at "pre-emergency prices," although some set a ceiling higher than that, the highest being 25% above pre-emergency prices.

Markets, Virtues and Ethics

 Do markets complement virtues, or sideline them?  Here's another entry into that discussion.

Reese, A., Pies, I. Solidarity Among Strangers During Natural Disasters: How Economic Insights May Improve Our Understanding of Virtues. J Ethics (2023). https://doi.org/10.1007/s10892-023-09460-7

"Abstract: The renaissance of Aristotelian virtue ethics has produced an extensive philosophical literature that criticizes markets for a lack of virtues. Drawing on Michael Sandel’s virtue-ethical critique of price gouging during natural disasters, we (1) identify and clarify serious misunderstandings in recurring price-gouging debates between virtue-ethical critics and economists. Subsequently, (2) we respond to Sandel’s call for interdisciplinary dialogue. However, instead of solely calling on economics to embrace insights from virtue ethics, we prefer a two-sided version of interdisciplinary dialogue and argue that virtue ethics should embrace economic insights. In particular, we argue that if virtue ethics is to preserve its social relevance under modern conditions, it should re-conceptualize its notion of virtue and re-evaluate the self-interested but effective—and in this sense solidary—help among strangers via markets as virtuous rather than devaluate it as greed, that is, as vicious price gouging.

...

"Most forms of virtue ethics share a central concern for the moral character of a person, the development of excellence, and an emphasis on avoiding vices and pursuing virtues. This means that in essence, the virtue ethics perspective focuses on good intentions and intended consequences. In contrast, modern economics fosters a systems approach to situational incentives and thus shifts the perspective to focus on the unintended consequences of intentional actions.

...

" Roth (2007) acknowledges repugnance and other kinds of assumed moral inappropriateness as real constraints on market design. He takes moral feelings seriously and proposes market arrangements that do not evoke such feelings. For example, many people experience a feeling of unease with the idea of being able to buy and sell kidneys, which is currently possible for Iranians in the Islamic Republic of Iran. By designing in-kind kidney exchanges, Roth has shown ways to facilitate market transactions that operate entirely without money and, as such, do not evoke repugnant reactions (Leider and Roth 2010; Roth 2016). Surely, there are still too many people desperately waiting for a kidney. However, the implementation of in-kind exchanges has saved lives. It has helped a significant number of people obtain a kidney that would have obtained none without such a system. In line with Roth, we take the virtue argument seriously. However, we choose a longer time horizon where the assumed moral inappropriateness is no longer a given constraint on market design but becomes, at least in principle, a variable.

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"Sandel insists on deciding case by case whether we should give the virtue of (probably less effective) selfless help precedence over the assumed repugnance of (probably more effective) self-interested help via markets, or vice versa.

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"Reassessments of social practices are not uncommon throughout history. Most people today perceive the practices of charging interest rates, dueling, and paying opera singers for their performance differently than their ancestors. 

State laws against price gouging

Michael Giberson provides this list:

State	Year	Notes
Alabama	1996	Code of Ala. § 8-31-1 thru § 8-31-6. LINK Alabama law; Any commodity or rental facility.
Arkansas	1997	A.C.A. § 4-88-301 – 4-88-305.
California	1994	Cal. Pen. Code § 396.
Connecticut	1986	Conn. Gen. Stat. § 42-230.
District of Columbia	2007	D.C. Code § 28-4101 thru 28-4102.
Florida	1992	Fla. Stat. § 501.160.
Georgia	1995	O.C.G.A. § 10-1-393.4.
Hawaii	1983	Haw. Rev. Stat. § 209-9
Idaho	2002	Idaho Code § 48-603; Food, fuel, pharmaceuticals, water.
Illinois	2005	Ill. Admin. Code tit. 14, §§ 465.10 thru 465.30.
Indiana	2002	Ind. Code §§ 4-6-9.1-1 thru 4-6-9.1-7; Fuel.
Iowa	1993	61 IAC 31.1(714); Merchandise needed by victims of disasters.
Kansas	2002	K.S.A. § 50-6,106; Any necessary property or service.
Kentucky	2004	Ky. Rev. Stat. Ann.  § 367.374.
Louisiana	1993	La. R.S. 29:732 LINK Louisiana law.
Maine	2006	10 M.R.S.A. § 1105.
Massachusetts	1990	Md. Reg. Code tit. 940, § 3.18; Petroleum products only.
Michigan	*	Mich. Stat. Ann. § 445.903(1)(z); General consumer code provisions not limited to emergencies.
Mississippi	1986	Miss. Code Ann. § 75-24-25(2).
Missouri	1994	15 CSR § 60-8.030; Necessities.
New Jersey	2001	N.J.S.A. §§ 56:8-107 to 8:109; LINK New Jersey law; Necessities.
New York	1979	NY Gen Bus §396-r.
North Carolina	2003	N.C. Gen. Stat. § 75-38; LINK North Carolina law.
Oklahoma	1999	15 OK St. §§ 777.1 thru 777.5.
Oregon	2007	ORS 401.960 thru 401.970; LINK Oregon law; Essential consumer goods and services.
Pennsylvania	2006	Link Pennsylvania law.
Rhode Island	2012	Rhode Island General Laws §30-15-19; Essential commodities including home heating fuels, motor fuels, food and water.
South Carolina	2002	SC Code 39-5-145.
Tennessee	2002	TCA Title 47 Chapter 18 Part 51; LINK Tennesee Law.
Texas	1995	Tex. Bus. & Com. Code Ann. § 17.46(b)(27) LINK Texas law; Necessities.
Utah	2005	Utah Code § 13-41-101 thru 13-41-202. Link Utah law; Retail goods and services.
Vermont	2006	9 V.S.A. § 2461d; LINK Vermont law; Petroleum or heating fuel product only.
Virginia	2004	Va. Code §§ 59.1-525 et seq., LINK Virginia law; Any necessary goods and services.
West Virginia	2002	W.V. Code § 46A-6J-1
Wisconsin	2006	Wisc. ATCP Ch. 106; Link Wisconsin law.
		List updated November 3, 2012 by Michael Giberson. Please see list of resources below for useful links on price gouging. (http://knowledgeproblem.com/2012/11/03/list-of-price-gouging-laws/