And the “Gun Salesman of the Year Award” goes to….President Obama?

You can’t argue with the facts, since President Obama took office back in 2008 gun manufacturing is up 140 percent, gun sales have hit record highs, and there are finally more guns in America than people. This boon in weapon manufacturing and sales is being appropriately coined the “Obama effect”. This “Obama effect” can be seen in overall gun sells per month over the past 8 years. Starting with the election of 2008, we saw gun sells hit 1.1 million the first month after President Obama took office (which was a record at that time) 4 years later we saw sales in January 2013 hit 2 million.

What these spikes in gun sales prove is that government truly does have a huge effect on markets. Just the mere notion that guns might become harder to purchase has set the gun market afire. This assumption of decreased gun supply/availability causes buyer and sellers to react in ways contrary to normal market behavior. We see price gouging by the sellers, hoarding by buyers, and manufacturers struggling to keep up with the new demand. It goes without saying that we see the same effects in the ammunition industry.

Changing gears really quick. We all know America has a love affair with guns and in my opinion - rightly so. There are countless research papers and statistics showing that by arming citizens we see less crime. One major publication arguing this point is a book by John Lott titled “More Guns, Less Crime”. This book helps the reader better understand gun control and why governments are so involved, it also helps explain the effects of government policies on the gun market.

Ultimately, I don’t think gun sales will go anywhere but up. People’s fear of the future will continue to drive sales and manufacturing. With the upcoming election of Hillary Clinton as president I  see no reason why the gun market will slow. I do think this must be a bittersweet moment for the gun makers and sellers as a whole. On one hand you have a president trying to put you out of business, yet on the other hand the mere fact that the president is trying to put you out of business is great for business.



Dave Tufte said...

Vain Janglings: 94/100 You wrote "people's fear" rather than "peoples' fears" (-6)

I don't know that I would call this people reacting "in ways contrary to normal market behavior.". Instead, I think this is the way expectations are supposed to work.

Now, I'm not claiming that expectations are always justified. But I do think it's fairly clear that the expectations of gun enthusiasts are that eventually a Democratic administration is going to successfully restrict gun regulations. And, I think a Democratic president elected with control of both houses of Congress is as good a chance as any.

The effect today of an expectation that a good will be harder to come by in the future is a shift outward in demand. That leads to a price increase, and more sales. Which is consistent with what we've seen in gun and ammunition markets.

The technical term for these really is self-fulfilling prophesies. Tighter regulations can reasonably be expected to raise prices. But expectations of tighter regulations, because they shift demand, can actually produce the higher prices, confirming the expectations were correct.

KC Hulse said...

Guns and ammunition are obviously complementary goods. This is one of the reasons the markets are highly correlated. What use is a gun without ammunition? We can see that these trends are based off of the consumers’ expectations. When consumers suspect a price increase or regulations that can make a good scarce, they will tend to stockpile these items. This is especially true if the items are non-perishable. The real question I have is how will the businesses respond to high demand and high regulations? According to this article, the gun market is an oligopoly controlled by 5 main manufacturers. I believe this is a good example of a Cournot Oligopoly.

There has been little change in the gun market. Gun manufacturers uses their distribution as a legal buffer to minimize the risk of a lawsuit. I think manufactures should do more, they should take it upon their shoulders to increase the safety and legal sales of the firearms. There has been a lot of talk of “smart guns” but nobody has really made any significant change. I think if one of these manufactures used this initiative as a PR campaign, they could gain market shares and maybe even receive special recognition from the federal government. Gun laws are bound to become more constrictive, it is the responsibility of all gun manufacturers to find and sustain a competitive advantage that differentiate themselves from the competition.

Dr. Tufte said...

KC Hulse: 47/50 You misspelled manufacturers once. (-3) I also think you mean "distribution system as a legal buffer".

OK, so I'd agree that it seems like a oligopoly. But modifying that with Cournot is more about how behavior influences the outcomes we see. What is it about guns that makes you think Cournot, and not, say, Bertrand or Stackleberg?

Good call about how my argument really applies best to goods that are not perishable. I forgot that.

I think one of the things that's weird about the gun and ammunition industry over the last several years is it seems like there's an inability to capitalize on this shift in demand. Why is that?