Wednesday 18 June 2008

In defence of profiteering

Mark Koyama at Oxonomics points us towards a piece by Tim Harford about the valuable services performed by so-called profiteers. As Koyama puts it
Price gouging communicates valuable information - it signals that there is a real and immediate scarcity.
The effects of "price gouging" is that those whose needs are not immediate do not buy and therefore those who do really need the good, petrol in this case, will be able to get it. A high price sorts people into these two groups. Harford makes the point that
... price-gouging is woefully undersupplied in this market.
Why is this the case? Basically because most retailers are terrified of being accused of profiteering. Well, all power (and profits) to the profiteer I say!

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