A lot of people in this thread are willfully ignoring some basic facts here. These products <i>are</i> being made in sufficient quantity for everyone. There is <i>not</i> a significant decrease in production. There <i>is</i> a significant increase in hoarding, and in many cases it is for the explicit purpose of creating artificial scarcity to increase the price of a product.<p>This is not a case of toilet paper suddenly costing more to produce. The price gouging law is not bringing toilet paper to levels where the <i>producer</i> of the product is taking some kind of operating loss or even reduction in profit of any kind. This is a case of consumers attempting to create small niches of artificial scarcity so that they can profit.<p>The free market arguments being made here are baffling, and willfully ignoring the aforementioned truths of this specific set of circumstances that have driven these specific laws. Have we lost all sense of humanity for the sake of our ideology?<p>We would be doing our entire society a severe disservice if our solution to this problem is simply "create so much toilet paper that people can't hoard it." The fuck are we going to do with that much toilet paper.
Price isn't just the cost of buying something, it's the reward for producing it. If we see too many price gouging laws, then you can expect shortages as companies find themselves unable to justify extreme measures that would otherwise increase production (at great expense). Secondly, I would expect that localities with price gouging laws will discover that their goods are being re-routed to other places without those laws, exacerbating shortages further.
Prices being elastic is good for people, in a vast majority of cases. It makes sure things get distributed more or less proportional to need, as opposed to just random or worse than random.<p>Case in point: I luckily found some hand gel still for sale online. Probably the very last one around here. So I stocked up - not resale quantities (thought it would have been trivial) but definitely more than I needed - something like 10 pieces. Why? Because the price was low and I'm doubtful I'll get to see any more this year.<p>If the price had been even slightly elastic, I wouldn't have bought 10 pcs for $10 each. I would have probably spent about the same, and gotten 2 or 3. Even better, I would probably still be able to get it from the groceries store, without any shortage - and buy just one as needed.<p>So we have two scenario: if the prices stay the same some people stock up early, and most are left without. If the prices go up proportionally, we end up spending a trivial amount more (let's be honest, spending an extra $7 on hand gel is not a tragedy) but we have no supply problems. First because there is much less stocking up, and then because everybody is incentivised to produce and sell more.
The crazy thing here is that they go after these gougers so aggressively for just selling a 20$ bottle of soap. And yet, predatory hospitals in the US can do x1000 times worse and not even get a slap on the hand. Hospitals are the #1 cause of bankrupcy in the US.
From an economics stand point, I don't understand why the government should ban price-gouging. Doesn't this place an artificial price ceiling that will ensure a shortage of goods? I would personally rather stores have items such as food/water at marked-up prices than not at all.
For basic goods like toilet paper, production hasn't fallen, and consumption hasn't risen. Distribution is still adequate for the amount of production and distribution, so it's not directly the problem, either.<p>The problem is buffering. Normally, buffering happens within the supply chain -- the back rooms of stores, loaded in trucks, warehouses, distribution centers, and the factories themselves. Now, we are telling everyone "buffer at home so you don't need to go out so much". But the problem is, buffering is much less efficient at the end of the chain, so you need to buffer a lot more. That's causing a short-term strain on production and distribution.<p>Blaming selfishness or gouging probably doesn't do much to help this problem. My guess is that the biggest problem is the discrepancy between how much stuff would be needed to buffer within the supply chain versus how much stuff is needed to buffer at the end of the supply chain (i.e. at home).<p>Worse, because it's a temporary buffering problem and there's no real increase in consumption, there's little incentive for production to increase now to alleviate it. Any increased production/distribution now just means less demand later when people start to work through their caches at home (and stop buying for a while).<p>So the only way to alleviate this is to allow the prices (that manufacturers charge) to rise, which will give manufacturers a cushion against the inevitable slump in the future. That's not very popular and not worth the brand damage, so it won't happen.<p>The good news is that I don't think this will last more than another few weeks. Gougers will stop buying at some point because they don't want to get stuck with a huge supply of toilet paper and no channels to sell it. And the home caches will fill up.<p>EDIT: this analysis has nothing to do with things like facemasks, where consumption has dramatically risen.
This would seem more fair if they said the price couldn’t be raised by more than 50% or 100% during an emergency. So toilet paper that was $10 would become $20. Not a major problem, and yet it gives producers the margins to keep staff working longer hours to produce more goods.<p>But no increase over 10%? That gives producers very little margin to work with. (10% is the rate set in the law. See the link.)
I highly recommend listening to Duke professor Mike Munger discuss price gouging on this episode of Econ Talk:<p><a href="https://www.econtalk.org/munger-on-price-gouging/" rel="nofollow">https://www.econtalk.org/munger-on-price-gouging/</a><p>It’s very entertaining and enlightening.
I've looked into this (I'm returning to California in two weeks) and you don't have to had to buy something to have standing to sue. If you see someone advertising $1.50 masks for $40 apiece on Amazon, for example, you can sue them in small claims court in CA (if you can find them) and, most likely win, according to my attorney who helped us with a similar case two years ago:<p>There's a similar law in California that allows individuals to sue businesses who offer you a contract that forbids leaving negative feedback on review sites. We had a garage door company offer us a contract that included such a provision. We didn't sign it, went to court, and quickly got a judgement for $2,500, which they paid.<p>(Here's information on that law:)<p><a href="https://racohenlawfirm.com/fines-for-trying-to-stop-bad-online-reviews-californias-new-yelp-law/" rel="nofollow">https://racohenlawfirm.com/fines-for-trying-to-stop-bad-onli...</a>
I'm noticing with Amazon/eBay shut down people have moved to craigslist and alternative resell markets. I see some listings where people are genuinely trying to help (4oz hand sanitizer, two 2oz bottles, alcohol pads, moist wipes) for $20, but these will probably be quickly bought and resold at a premium.
In a free-market, sellers and buyers will find an equilibrium price at which goods can be exchanged for money. When an outsider such as a government artificially sets the price (or forces the price to stay constant), there will be shortages or overproduction.
From the law:<p>“However, a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, during the state of emergency or local emergency, and the price is no more than 10 percent greater than the total of the cost to the seller plus the markup customarily applied by the seller for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local emergency.”<p>I am glad they included this language, even though it is a bit sloppy. What I am referring to is that yes, costs can increase dramatically during an emergency, however, the “markup customarily applied” could also change in dramatic ways.<p>One of the aspects of the theory of pricing is to include in the equation variables to address support, business continuity, expansion, disruptions and other “nonlinear” factors.<p>In an emergency what might have been simple could become complex. This means it might be impossible for a vendor to maintain an ongoing supply or continue to offer services. And, given the current reality, if the consequence of providing the goods or services could be loosing your entire staff to a quarantine, your ability to maintain a supply might require a very different approach to pricing.<p>Given the severe consequences, this language could cause vendors to avoid exposure for fear of being destroyed by an uninformed claim. Which means supply would contract and prices would explode.<p>That said, the guy buying water at Walmart for $1 to then sell it for $5 should get nailed to the wall with rusty nails.
How often does anyone get charged for this other than a few token made to be an example for the most egregious behavior? Price gouging laws seems to be mostly a threat rather than an actual attempt at regulating pricing. It's similar to how the police will arrest huge numbers of people during a protest and then drop the charges against almost all of them the next day. The backbone of the protest had been broken so it no longer mattered if they swept up a bunch of bystanders with protestors and rioters as they're all let go. I wonder how well any of these gouging laws would stand up in court if the state didn't quickly drop charges when challenged.
Come on, guys. Hoarding a commodity in order to corner a market and thereby profiteer is immoral, (often) illegal, and a distortion of the free market. It’s bad behavior. Please stop.
So, on the one hand, people react with aghast to find out that a bottle of Purrel soap costs 20$, when it actually should cost 2$ to produce.<p>But, here in CA, on the other hand, when a House (something far more crucial to people's lives), costs 800,000$ instead of 200,000$, that's okay (at least with the vast majority of voters).<p>I should mention the reason for 1 and the other are completely different. The soap, is merely due to the seller, wehreas the housing shortage is a political choice voters agreed to.
The current hoarding issues are being addressed in Australia by all supermarkets, they are rationing key goods ( 1 pack toilet paper, pasta, handwipes etc per day) but keeping prices low. You can deal with rapid demand increases for essential goods this way.
I see some commenters saying that preventing price gouging will take away the incentive to produce more of a certain good when the demand increases. This doesn't make sense to me.<p>If, under normal market conditions, producers already make X amount (of , say, toilet paper) due to Y demand at price Z, when the demand spikes to 2Y, if you can produce and sell 2X goods at the same unit cost, you can double your profit without raising the price at all.<p>One might argue that in order to rapidly increase production capacity, the unit cost will rise as well. But that doesn't necessarily mean that you have to allow prices to rise. As long as the extra investment allows you to produce and sell enough units so that the extra profit is greater than your cost, the incentive is still there. And that's ignoring the fact that a price cap doesn't have to fix the price at current levels - it can limit the increase to a reasonable amount.
What is everyone experiencing for price gouging / shortages on the west coast?<p>Even though I stocked up myself, I feel like shortages of food and general supplies are going to be temporary. The immediate goal is to avoid having to go back to stores before everybody else figures out the new normal (eg don't fucking stand there coughing in the middle of the store).<p>Hand sanitizer/IPA seems easy to produce in industrial quantities, and it feels like that will sort itself out in a week or two.<p>Respirators/masks seem the only thing that are and will continue to be in short supply. But it feels like government (including health providers) is going to have to get them into everybody's hands eventually. But maybe that's overly optimistic.
If I buy all the toilet paper in a store and resell it for 5% more is that considered price gouging?<p>What if I sell it to another middle man who also distributes and sells for 5% more?