Actually this is usually because of local anti-price gouging laws pushed by ignorant people such as the author of the above piece. You can thank these people for mile-long gas lines, and general shortages all around, because to them MORALITY has nothing to do with the consequences of disrupting supply in an environment of sudden excess demand. Its all about feeling good and punishing people for following market incentives to alleviate shortages.
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.
I guess it's just splitting hairs... On the one side is the classical economist saying, "Customers shouldn't be screaming in indignation over this" which is my reaction to the author's rant. The other is the behavioralist which is saying, "This is just bad business if customers feel slighted."
That would be fine if the story stopped there. The balance could be found out by experimentation between many companies and pricing models. But it doesn't stop there. Regulations are brought in and you damn well believe that they are enforced ruthlessly even in supposedly free-market friendly 'red' states.
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Actually this is usually because of local anti-price gouging laws pushed by ignorant people such as the author of the above piece. You can thank these people for mile-long gas lines, and general shortages all around, because to them MORALITY has nothing to do with the consequences of disrupting supply in an environment of sudden excess demand. Its all about feeling good and punishing people for following market incentives to alleviate shortages.
"Why Economists Love Price Gouging, And Why It's So Rare": http://www.npr.org/blogs/money/2012/10/29/163861383/why-econ...
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.
I guess it's just splitting hairs... On the one side is the classical economist saying, "Customers shouldn't be screaming in indignation over this" which is my reaction to the author's rant. The other is the behavioralist which is saying, "This is just bad business if customers feel slighted."
That would be fine if the story stopped there. The balance could be found out by experimentation between many companies and pricing models. But it doesn't stop there. Regulations are brought in and you damn well believe that they are enforced ruthlessly even in supposedly free-market friendly 'red' states.