Consumers Can Price Gouge Too?

Mar 31, 2020 by

Sellers charging consumers higher-than-normal prices for goods during trying times are almost always accused price gouging. No matter the market activities and/or political factors that play roles in affecting prices, the general view is that the elevated prices reflect the privileged “haves” (sellers) taking advantage of the desperate “have-nots”(consumers). But what if a seller decided to allow consumers to voice what they are willing to pay and adjust the price accordingly? Apparently, that is also price gouging.

The Texas Attorney General’s Office filed a lawsuit against Auctions Unlimited in Houston, TX for auctioning face masks, hand sanitizer and, cleaning supplies at “exorbitant prices.” Though the auctioneer started the bids at $1 and the bidders themselves offered the prices, the Attorney General Ken Paxton maintains:

My office will not tolerate anyone taking advantage of Texans in need and profiting from this health crisis.

This situation highlights a major issue with price gouging laws that is seldom, if ever, mentioned; Price gouging laws punish sellers for the preferences of consumers.

Sellers of goods won’t be able to make sales if they mark their goods higher than what consumers are willing to pay. Since profit is needed for the seller’s firm to survive, making sales is crucial. Likewise, consumers will not purchase what they either cannot afford or what costs more than they want to pay. These circumstances mean that the prices of goods will not rise to the point of being generally unobtainable. So while prices during crises may increase, they will remain low enough to sustain frequent sales.

Of course, there will be people who protest and bemoan higher prices during a crisis, but this doesn’t undo the fact that enough people have to be making purchases at those higher prices for the prices to remain at the “exorbitant” level in the first place.

So when the government charges sellers with price gouging, the sellers are being penalized for “taking advantage” of consumers with prices the consumers voluntarily accept. This point is made more obvious in the aforementioned case of the auctioneer getting hit with a lawsuit for prices the willing bidders themselves explicitly chose.

These observations call into question who price gouging laws are designed to serve. Obviously the citizens who report price gouging are among the appeased. Those who were priced out of the market by the higher-than-normal prices may also be in that category. Yet, considering how consumers’ voluntary purchases contribute to gouged prices and factoring in how price gouging was charged in regards to an auction, one has reason to ponder if price gouging laws are simply another tool used by the government to exert its influence and justify the existence of its many bureaucrats.

Source: Consumers Can Price Gouge Too? – John A. Lancaster

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