The debate on whether price gouging is ethical or unethical has been ongoing. While laws in some nations have restricted the actions naming it ethical, some nations are deliberating on whether it is ethical or not. Price gouging is the act of the seller, pricing their goods or services at a price above the market rate when there is no alternative retailer available. The phenomena occur when the prices are sharply raised mostly temporarily when the demand is high. Price gouging is therefore as a result of an economic occurrence, but the name itself implies that someone is taking aggressive action against another (Lee 583). The people in support of price gouging believe that it is a reaction to supply demand and it has nothing to do with suppliers …show more content…
In most countries such as in Texas, the government has termed price gouging as illegal, and the office of the attorney general has the power to act against anyone engaging in the action after the government has declared a disaster (Paxton). The law, for instance, states that after the governor declares a disaster, anyone who performs a misleading or dishonest act to take advantage of the situation, by selling or leasing medicine, food fuel or any other necessity at a price higher than the market value shall be prosecuted. The purpose of this discussion is to explore the philosophical matters regarding price gouging and to show that the act is not immoral and should not be condemned. The argument will be done by rebutting the held beliefs of the ethics of price …show more content…
These next paragraphs, therefore, will look at the way the two views are wrong and show that the act is morally praiseworthy. Price gouging has been seen as objectively coercive. However, price gouging in most cases has three features that seem to weaken the concerns of price coercion on the understanding of that notion. First, in price gouging, most purchasers consent to the exchange. Second, the act does not involve deception, irrationality or the lack of information. The two facts support the morality of gouging although they do not explain if the buyer enters into the purchase willingly. To finish, unlike in coercion, the damage probable to happen to the victim who is the party buying, is not initiated by the seller rather by the catastrophe the buyer is trying to recuperate. The actions of the seller are to advance the situation of the buyer and not to worsen it. The baseline to which the consumer’s condition should be compared to determine whether they are being exposed to coercion offer or danger can be discussed in two ways. First, assuming that the merchant has a moral responsibility to supply the goods to the purchaser at a price lower than the market rate. Under this assumption, the seller’s offer to take it or leave it at the market rate is more of a threat than an offer. The act becomes a threat because the seller is threatening
Setting prices too high would discourage purchasing and setting prices too low negatively affects revenue. While several pricing strategies exist, the use of a value-based pricing system, as implemented at Cabela’s, offers an optimal strategy that meet both customer expectations and company requirements.
Tommy Takem owns a small appliance store in the southwest part of the state of Virginia. Tommy has built his business on targeting the poor, unsophisticated, and uneducated in the Appalachian regions of Virginia, Kentucky, Tennessee, and West Virginia. There is little competition in the region where he sells his goods; therefore, he charges 10-20% higher prices than the nearest retail competition. Furthermore, as a ruse to increase sales, Takem’s has hired a few high pressure salespeople to go door-to-door selling the appliances and electronics at a markup of 30% more than his retail location, though this information is not disclosed to the purchaser. Also, as most of Tommy’s clientele have poor credit, the financing is handled by Takem’s Appliances as well, with an additional charge of 15% plus the highest interest rate allowable by
Critical Response: Given the three possible responses from the book, I feel like #2 is the most ethical of the three. However, I feel like all three aren’t satisfactory ways to treat this situation. I will analyze them one by one, then give my opinion of what the salesperson should do.
Price discrimination can be defines as when a firm offers an “individual good at different prices to different consumers” The Library of Economics and Liberty elaborates on its pricing strategy, stating Comcast offers different pricing depending on what features the consumer desires. For instance, the cable company will charge a higher price to a person who uses several services as part of their cable package. Conversely, the firm charges a very low price to someone who would “otherwise not be interested” , providing basic services at a minimum price. It takes advantage of the regulation imposed on the cable industry by offering the required basic package at seemingly attractive prices. Using this pricing system allows for it to attract different consumers whose maximum price they are willing to pay differs. Recently, Comcast attempted a new billing strategy by introducing a data usage cap. It essentially expanded on the company’s existing price discrimination method by charging customers according to how much data they used each month. Comcast also utilizes penetration pricing, where it offers its product at low prices to attract new consumers, later raising the prices once the customer is subscribed for a certain amount of time. Generally it claims the original prices were promotional only, lasting only a small amount of
Apart from Antitrust laws, there are several other laws that promote fair business practices. The Robinson-Patman Act prohibits price discrimination. This act ...
However prior to the modern understanding of Consumer Rights there was a understanding of Caveat Emptor – Buyer Beware –this has been a fundamental premise of consumer wellbeing prior to World War ‖ , relation to transactions, principle that the buyer purchases at his own risk in the absence of an express warranty in the contract . This common law rule assumes that buyers and sellers are in an equal bargaining position. However there has been evident change in consumer rights which have contributed to the precedence of using Caveat Emptor is no longer acceptable, apparent in the case ACCC v Hewlett Packard Australia (HP), illustrated that no longer can a company ...
A company known as Apex Art was recently asked to prepare a bid on 500 pieces of framed artwork for a new hotel. If Apex Art wins the bid, then the benefits would lead directly to sales representative Jason Grant, whose income relies on commission. In other words, he would receive a large sum of money as a result of the winning bid. The cost accountant for Apex, Sonja Gomes, prepared the bid and calculated the total product costs of the framed artwork to be $121,000. Since the company policy states that the pricing must be at 125% of full cost, Gomes provides Grant a total amount of $151,200 to submit for the job. Grant notifies Gomes that at the price of $151,200, the company is incapable of winning the job. He confesses to Gomes that he had spent $500 of company funds to treat the hotel’s purchasing agent to a basketball playoff game where the purchasing agent revealed to him that a bid of $145,000 would win the job. At first, Grant had no intention of letting Gomes know of this information because he was sure that she would have developed a bid that would be below the amount that the purchasing agent told him about, $145,000. Therefore, he thoroughly explains to Gomes that if the company does not take advantage of the important information that the purchasing agent had revealed to him, then the $500 of company funds that he had spent would go to waste. Nevertheless, Apex Art would still generate some profit if it wins the bid at $145,000 because it is higher than the full cost of $121,000. In order to come to fair grounds, Gomes advises Grant to use cheaper materials for the frame, which will assist him in attaining a bid of $145,000. Since the artwork was pre- selected and thus cannot be altered, the total amount of cost redu...
The law of demand tells us that "Quantity demanded rises as price falls, other things constant, or alternatively, quantity demanded falls as price rises, other things constant (McGraw 2004). The XBOX 360 phenomenon that took place in 2005 is a good example of this economic principle at work. Microsoft's XBOX 360 gaming console was released into the U.S. market on November 22nd 2005. The release came after a great deal of advertising and media hype that ensured that the demand for the product would outweigh the supply. Quite simply, there were more consumers wanting to purchase the product than there was product available. The retail price for the gaming system with a hard drive was $399. Many consumers, however, paid a great deal more than the $399 sticker price to acquire the system. On the morning of the U.S. release, retailers across the nation sold out of the product within just a few hours of opening their doors to consumers. In the weeks that followed however, many consumers purchased the unit from sellers on on-line auction sites and even from individuals in parking lots for as much as $1500. The reason for this was that the supply was significantly less than the demand for the product. In some cases, parents who wanted to ensure that their children received and XBOX 360 for Christmas in 2005 were willing to pay well over retail for the hard-to-acquire system. In other cases, video gaming enthusiasts wanted to be among the first individuals to own and play the system. News reports across the nation showed footage of people lining up days ahead of November 22nd in order to secure a place in line at retailers that would have the product available on the release date.
Price gouging is increasing the price of a product during crisis or disaster. The price is increased due to temporal increase in demand while supply remains constrained. In many jurisdictions, price gauging is widely considered as immoral and is illegal. However, from a market point of view, price gouging is a correct outcome of an efficient market.
- The two ethical justifications for the economic model are the utilitarian and individual rights or private property defenses. The most significant challenges facing the utilitarian justifications are: those that focus on the adequacy of free markets as a means to the ends of maximally satisfying consumer demand, and those that focus on the appropriateness of these ends as legitimate ethical goals. Of these, market failure is a popular challenge that is raised when considering situations in which the pursuit of profit will not result in a net increase in consumer satisfaction. The two significant challenges to the private property defense are: recognizing that property rights are not absolute, and understanding that historically, corporate property rights differ from personal property, questioning the understanding of stockholders implied by this defense.
Price Elasticity is the measure in responsiveness of consumers to changes in the price of a product or service. The evaluation and consideration of this measure is a useful tool in firms making decisions about pricing and production, and in governments making decisions about revenue and regulation. “Price Elasticity is impacted by measurable factors that allow managers to understand demand and pricing for their product or service; including the availability of substitutes, the consumer budgets for the product or service, and the time period for demand adjustments.” The proper consideration of Price Elasticity allows managers to set pricing such that the effect on Total Revenue is predictable and adjustments to production are timely. The concept of Price Elasticity is employed in the management of commercial firms and government.
Stores during natural disasters have to raise the price of goods, so they can keep supplies coming in for the people who need it. But when stores get their prices way up there it sometimes gets hard for people with less money to buy the necessities. Some people have good reasons to charge the crazy prices that are of price gouging. For starters, they could only have enough to get them by, and so they decided that they would buy something that someone needed and take it to the people for more money than they paid for it. It’s one thing to price gouge because you actually need the money, but it is a complete other to price gouge just because you want some extra money.
The plaintiff firm of surveyors bought a second-hand Rolls Royce from the defendants which developed serious defects after 2,000. It was held that the firm was acting as a consumer and that to buy in the course of a business 'the buying of cars must form at the very least an integral part of the buyer's business or a necessary incidental thereto'. It was emphasised that only in those circumstances could the buyer be said to be on equal footing with his seller in terms of bargaining strength.
When people think of predatory pricing, two main laws come to the minds of most...
What Money Can’t Buy: The Moral Limits of Markets: Non-Fiction Assignment What Money Can’t Buy: The Moral Limits of Markets by Michael J. Sandel is a fascinating book, which examines the ways in which we have moved from having a market economy to having a market society. The Harvard professor argues that our world is one in which everything is now for sale, and questions whether this approach to daily life is truly ethical. The book is divided into 5 sections, each examining an area where markets have encroached on morals: jumping the queue, incentives, how markets crowd out morals, markets in life and death, and naming rights. The sections cover everything from airports, amusement parks and carpool lanes to Springsteen concerts; cash for