The issue of legality when it comes to price gouging in America is very cut and dry, it is not acceptable. A community where everything is functioning normally rarely comes face to face with this problem anyways because the market (consumers) can adjust the price by simply not buying high priced products and opt for the less expensive alternative. The question I pose today is what happens if a natural disaster hits an area and a lot of the industry in the area takes a hit? The area is now exposed to things that were once unimaginable and with a scarce amount of resources what are merchants to do? "This opens up a whole range of interesting questions about what ethical rules apply to business in the absence of law and order.", Chris MacDonald says.
This seems like an irrational situation but when Hurricane Katrina struck the city of New Orleans there were news stories talking about multiple merchants "price gouging" and charging unfair prices to the civilians and when the earthquake struck Haiti a few months ago there were similar claims of price gouging against merchants as the price of a gallon of gas went from $0.30 to $1.20 an increase four times over. On the surface this issue seems cut and dry under our American price gouging definition but in a time of disaster can the definition be bent or twisted?
Under normal circumstances I would say an increase from $0.30 to $1.20 a gallon would be an example of price gouging, but let's step back and think for a second. This disaster has put all people, including the merchants, under great stress and they have possession of a desired resource. Is it not fair that they sell their product at a higher cost to compensate for higher expenses in the time of disaster and heightened demand? If this is not acceptable what is going to stop them from packing up shop and hoarding their product and keep the public from accessing it completely?
Obviously this issue is less cut and dry in a situation where disaster has occurred and there are many underlying ethical issues to evaluate. As with the topic of business ethics as a whole the issue of price gouging in these situations can be seen from both sides and there is ample information to support either side in these situations.
http://www.businessethics.ca/blog/2010/02/is-ethics-profitable.html
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ReplyDeleteWhile you present a fine overview of the issue of price gouging, I believe there are vital insights we can obtain by delving deeper. You bring into question the morality of a merchant increasing his or her price and profit during a natural disaster, with the rationale that the increased stress placed upon the merchant justifies the added profit earned. What you have ignored, however, is the way in which consumers themselves - the supposed victims of price gouging - can actually benefit from this practice in certain instances.
ReplyDeleteConsider the case of John Shepperson, a man who was arrested for price-gouging after selling generators to victims of Hurricane Katrina. Shepperson purchased 19 generators and traveled 600 miles to an area of Mississippi that was left without power after the hurricane struck. Shepperson offered to sell the generators for twice what he paid for them, and people were eager to buy them. In the end, however, Shepperson's generators were confiscated and he was jailed for 4 days for price gouging.
The question is, did the public truly benefit from Shepperson's arrest? I would venture to say no. During times of shortages, prices must go up, or the goods in demand will disappear. The laws of supply and demand will dictate that prices go up in these situations. This assures that only people who truly need the good the most will purchase them, thus making the most efficient use of scarce resources. The generators that the police confiscated from Shepperson could have been put to good use by the victims of Katrina, who may have valued them at a price even higher than what Shepperson was charging. Furthermore, Shepperson did not greedily purchase these generators in bulk from an area affected by the disaster and immediate sell them at a raised price. He bought them where they were plentiful and traveled 600 miles to an area that was in dire need of power. I believe Shepperson and his potential customers were done a great injustice by Shepperson's arrest.
Situations like this demonstrate the complexity of the moral considerations surrounding price gouging. In general, I believe these situations must be evaluated on a case-by-case basis to avoid scenarios like John Shepperson's arrest being repeated.
Source:
"MYTH: Price-Gouging Is Bad - ABC News." ABCNews.com - Breaking News, Politics, Online News, World News, Feature Stories, Celebrity Interviews and More - ABC News. 12 May 2006. Web. 11 Mar. 2010. http://abcnews.go.com/2020/Stossel/story?id=1954352&page=1.