Are consumers facing excessive prices for items like Taylor Swift tickets and gasoline, or is it just a perception?
Miller dreams of attending Swift's concert once it returns to the US, but despite entering a massive ten accounts on Ticketmaster's presale, she failed to secure tickets at face value. Tickets for nosebleed seats are already being resold for ridiculous amounts of money.
Miller, who's currently pursuing a nursing degree in Cleveland, expressed her frustration to CNN. "People are taking advantage of fans and their vulnerability since fans would do anything to be a part of Taylor's show," she said.
The issue of price gouging has been quite prevalent, often used to describe hiked gas prices during natural disasters. It boils down to the feeling of being exploited, but economists and even President Biden can't seem to agree on a solid definition.
One thing everyone agrees on is the ever-increasing prices involving inflation. Though we're not seeing the same breakneck pace as before, prices are still on the rise.
Likewise, technology now allows prices to change in a heartbeat, a stark contrast to the old days where increased prices required printed menus.
Distraught consumers are now taking to social media to demand justice when they feel they are being overcharged. But are they really victims of price gouging, or simply the effects of inflation or supply and demand?
Defining Price Gouging
Gavin Roberts, a Weber State University economics professor, pointed out that many anti-price gouging laws don't have a clear definition of what price gouging is.
Biden has been quite vocal about combatting price gouging, using it interchangeably with "corporate greed." But, Biden hasn't given a specific definition of either term. He simply claimed, "To any corporation that has not brought their prices back down — even as inflation has come down, even supply chains have been rebuilt — it's time to stop the price gouging."
While Biden hasn't defined what price gouging is, economists have their own opinions.
In Roberts' view, price gouging happens when the supply of a good is scarce, there's minimal competition, and the consumer has little information about the price they'll be charged or no opportunity to shop around for lower prices, making them an easy target for exploitation.
Not everyone agrees with Roberts. Steven Suranovic, an economics professor at George Washington University, sees price gouging differently. "I define it as the use of market power to secure a higher price than what would occur with free competition. For instance, Martin Shkreli, who was a price gouger when he set insanely high prices on some pharmaceutical drugs his company controlled," he stated.
In 2015, when Shkreli was in charge of Turing Pharmaceuticals, the price of the life-saving drug Daraprim used by AIDS patients skyrocketed from $13.50 a pill to $750 a pill. This resulted in widespread outrage.
When contacted through LinkedIn, Shkreli responded, "We don't talk to snitches."
Price gouging or dynamic pricing?
During an Uber ride, the cost can suddenly increase when demand is high and there's a shortage of drivers, a process called dynamic pricing. There's no set price for your ride; instead, it's tied to your location and how many people want rides in the area.
Uber and its main competitor, Lyft, have been criticized for allowing prices to surge during times when public transportation is severely disrupted. They've paused surge pricing at times, but they've continued to implement it in situations with high demand for rides.
On New Year's Eve 2011, Uber experienced its highest-ever demand in New York City, causing the price of a ride to surge above $100. This sparked accusations of price gouging.
Travis Kalanick, Uber's CEO at the time, released a blog post stating, "Nobody is required to take an Uber, but having a reliable option is what we're after. It's not about gouging." [cf:531effc0fb969c872a88165b]
Suranovic stated that surge pricing could merely be a result of "a competitive market." However, he admitted that abrupt price increases tend to make consumers think they're being overcharged and "blame businesses for profiteering."
In an interview with CNN, he explained that rising costs due to inflation cause gradual price hikes, but he wouldn't consider it gouging.
Consumer precautions
Professionals in the field of pricing strategy cautioned that unexpected price hikes could spark hostility.
"Price gouging is a personal sentiment from customers feeling exploited by an unreasonably high price," said Rafi Mohammed, the founder of a company specializing in pricing methods called Culture of Profit.
"When choosing a price, managers must grasp and foresee that their prices may evoke various emotional reactions ranging from 'this is inexpensive' to 'this is unjust.'"
Consequently, he suggested setting prices that encourage responses like, "Thanks! I compared numerous offers and found that your product and cost offered me the greatest value."
Despite this, if you're convinced you're being exploited, your state might be able to get involved - many enforced price ceilings for necessities like toilet paper during the pandemic. (Nonetheless, Roberts' study proposes that some anti-price gouging measures may have contributed to the lack of accessible toilet paper.)
Teresa Murray, the lead of the consumer protecting division of US PIRG, a non-profit consumer advocacy research organization, wrote in a blog post that "if you unsure whether an item is exorbitantly priced, reporting issues to the business and your attorney general is a better approach."
Perhaps state attorneys general need a segment dedicated to Swifties, as well.
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In the context of Miller's struggle to obtain Taylor Swift concert tickets at face value, she expressed her frustration over the exploitation of fans by resellers who take advantage of their vulnerability and charge excessive prices.
Following the discussion about defining price gouging, economist Gavin Roberts stated that price gouging happens when the supply of a good is scarce, there's minimal competition, and the consumer has little information about the price they'll be charged or no opportunity to shop around for lower prices, making them an easy target for exploitation.
Source: edition.cnn.com
