Price gouging

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The phenomena

Price gouging is a pejorative term referring to when a seller spikes the prices of goods, services or commodities to a level much higher than is considered reasonable or fair, and is considered exploitative, potentially to an unethical extent. Usually this event occurs after a demand or supply shock: common examples include price increases of basic necessities after hurricanes or other natural disasters. In precise, legal usage, it is the name of a crime that applies in some jurisdictions of the United States during civil emergencies. In less precise usage, it can refer either to prices obtained by practices inconsistent with a competitive free market, or to windfall profits. In the former Soviet Union, it was simply included under the single definition of speculation.

The term is similar to profiteering but can be distinguished by being short-term and localized, and by a restriction to essentials such as food, clothing, shelter, medicine and equipment needed to preserve life, limb and property. In jurisdictions where there is no such crime, the term may still be used to pressure firms to refrain from such behavior.

The term is not in widespread use in mainstream economic theory, but is sometimes used to refer to practices of a coercive monopoly which raises prices above the market rate that would otherwise prevail in a competitive environment. Alternatively, it may refer to suppliers' benefiting to excess from a short-term change in the demand curve.

As a criminal offense, Florida's "state of emergency" law is an example. Price gouging may be charged when a supplier of essential goods or services sharply raises the prices asked in anticipation of or during a civil emergency, or when it cancels or dishonors contracts in order to take advantage of an increase in prices related to such an emergency. The model case is a retailer who increases the price of existing stocks of milk and bread when a hurricane is imminent.

In Florida, it is a defense to show that the price increase mostly reflects increased costs, such as running an emergency generator, or hazard pay for workers, while California places a ten percent cap on any increases.

As of 2008, laws against price-gouging have been enacted in US 34 states. It can be coupled with anti-hoarding laws.

Legal and ecanomic defanition

Price-gouging is often defined in terms of three criteria listed below:

1. Period of emergency: The majority of laws apply only to price shifts during a time of disaster.
2. Necessary items: Most laws apply exclusively to items which are essential to survival.
3. Price ceilings: Laws limit the maximum price that can be charged for given goods.

Part §17.46(b) of the Texas Deceptive Trade Practices-Consumer Protection Act tackes price gouging and thus provides that it is a false, misleading or deceptive act or practice to take advantage of a disaster declared by the Governor under Chapter 418, Government Code, by:

1. Selling or leasing fuel, food, medicine or another necessity at an exorbitant or excessive price; or
2. Demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine or another necessity.

It is not related to the crimes of usury, price fixing or extortion other than it's the immoral attainment of money.

Hurricane Irma (2017) related cases

The USA and Canada sent aircraft in to rescue thire nationals between September 4th and 7th, depending on location. Sadly, the commercial flights from USA, in particular Florida, horrendously price gouged thire passengers!

Hurricane Irma related price gouging reports rose to over 3,000 cases on September 9th on the Florida price gouging hotline.

Sources

1. https://en.wikipedia.org/wiki/Price_gouging
2. https://www.texasattorneygeneral.gov/cpd/price-gouging
3. http://www.orlandosentinel.com/business/os-fl-hurricanes-gouging-20170909-story.html
4. https://en.wikipedia.org/wiki/Profiteering_(business)
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6. http://www.jewishworldreview.com/cols/kudlow061400.asp
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12. https://en.wikipedia.org/wiki/Extortion
13. http://www.orlandosentinel.com/business/os-fl-hurricanes-gouging-20170909-story.html
14. https://en.wikipedia.org/wiki/Profiteering_(business)
15. https://object.cato.org/sites/cato.org/files/serials/files/regulation/2011/4/regv34n1-1.pdf
16. http://www.jewishworldreview.com/cols/kudlow061400.asp
17. http://myfloridalegal.com/pages.nsf/Main/5D2710E379EAD6BC85256F03006AA2C5?OpenDocument
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20. https://en.wikipedia.org/wiki/Usury
21. https://en.wikipedia.org/wiki/Price_fixing
22. https://en.wikipedia.org/wiki/Extortion
23. https://www.texasattorneygeneral.gov/cpd/price-gouging
24. https://www.wired.com/story/prison-video-visits?mbid=nl_083117_daily&CNDID=%%CUST_ID%%