Tuesday, October 30, 2012

Despite Sandy's best efforts, price gouging is really rare

Via Planet Money:

Even in states without price gouging laws, most stores won't raise prices for generators or bottled water or canned food. Which raises a question: Why? Why doesn't price go up when demand increases? Why don't we see more price gouging? 
The people Kahneman surveyed said they would punish businesses that raised prices in ways that seemed unfair. While I would have paid twice the normal price for my groceries yesterday, I would have felt like I was getting ripped off. After the storm passed, I might have started getting my groceries somewhere else. 
Businesses know this. And, Kahneman argues, when basic economic theory conflicts with peoples' perception of fairness, it's in a firm's long-term interest to behave in a way that people think is fair.

Isn't that something? I am constantly astounded by collective intelligence.

Now that we're all happy, I suppose we can get rid of those superfluous regulatory pricing laws, no?

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