9/14/2005

Price gouging is when the price of a high demanded good is rising and rising until it is so high that it is ridiculous to buy. So is price gouging immoral? I think yes, when you are taking advantage of your customers. Price gouging is economically efficient and it will maximize your profit, but not for long. When the demand of the good is lowering, so will your profit. This is because when you take advantage of your customers, they will remember that for a long time and will find a more reliable and honest company to but that product. You will lose your long term customers. (http://www.truckandbarter.com)

7 comments:

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cort said...

Price gouging definitly leaves a bad taste in a customer's mouth and it might take a while for a customer to return to the gas station when things cool down,but is it really immoral? I say no. Car dealerships are known to overcharge for the repairs on a car. A local plumbing company here in Salt Lake City charges 5 or 6 times for labor than it gives to the employee that does the job. And of course a Starbucks coffee doesn't cost anywhere near the price to make as they sell it for. But don't get me wrong. I think that its bad for business to price gouge in the way that the gas station did. A company's job is to serve its customers and the companies that get away with it sell more than what you might see at first (service, a lifestyle, whatever). From the sound of things it sure didn't look like price gougers were really looking to serve the public's interest but only make a few quick extra bucks. Its not immoral but a business will lose more in the long run than it will gain short term from a sudden price gouging.

cort said...

while surfing the net i came across this article showing how Intel is price gouging.
a $40. so even though the folks who microchip that they might sell for over $1000 is made for about sold their gas for 3 or 4 times the normal price Intel is gouging 40 times. Is that unethical?

http://news.com.com/Intels+manufacturing+cost+40+per+chip/2100-1006_3-5862922.html?tag=nefd.top#talkback

You might say that Intel has a lot of hidden cost and r&d or whatever but even a quick look at their income statement ( http://phx.corporate-ir.net/phoenix.zhtml?c=101302&p=irol-fundIncomeA&t=&id=& )shows that they are making a considerable profit. last year they made $34000000 and had only 14000000 in costs. after considering r&d and taxes they took home $7500000. Thats over 20% profit. Compare that with Walmart (that everyone hates) who makes .5% profit. Is that unethical? I don't think it is.

destiny said...

Is price gouging immoral? It depends on how you look at it. Besides, how can you define something as immoral or moral when everyone's standards and morals are so entirely different? What may seem wrong to one person, I might think is perfectly normal. Sure the gas stations were charging high prices, but all of them were. They were simply taking advantage of a lucrative opportunity. It sucks for us as consumers, but people were still paying the prices.
I buy textbooks on the internet all the time and turn around and sell them to students here for a MUCH MUCH higher price. Is this price gouging? Is it wrong for me to do this? I'm simply taking advantage of the opportunity as I mentioned before.
It's one thing to say that the increased prices on gas is hard on your bank account, but is it really immoral?

Dr. Tufte said...

-3 on Ava's post for a poorly formatted link, a link that doesn't go to a page related to the topic, and to title.

Price gouging is an idea that is badly abused. If suppliers are gouging now because prices are high, exactly what were demanders doing to suppliers when prices were low? Gouging?

I do like what Ava added to this discussion though - there is an element of strategy involved in a decision to raise prices: is it worth it to make more now, when you might lose something later.

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