Surge Pricing and Price Gouging: Public Misunderstanding as a Market Imperfection
Steven Suranovic ()
Working Papers from The George Washington University, Institute for International Economic Policy
This paper evaluates the economic and ethical effects of sudden excess demand for goods or services. The normal market response of â€œsurge pricesâ€ or â€œprice gougingâ€ invokes sharp negative reactions by consumers who consider the profit seeking market response to be unethical. Public condemnation often prevents merchants from following market signals, or induces governments to intervene by implementing price ceilings. This paper argues that public misunderstanding preventing efficient and fair outcomes is the true market imperfection in these cases. The paper provides reasons for the public misunderstanding and suggests that demonstration effects would be the most effective way to induce more favorable market outcomes.
Keywords: Surge pricing; Price Gouging; Imperfect information; Shortages (search for similar items in EconPapers)
JEL-codes: L51 D63 D43 D80 (search for similar items in EconPapers)
Pages: 26 pages
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Working Paper: Surge Pricing and Price Gouging: Public Misunderstanding as a Market Imperfection (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:gwi:wpaper:2015-20
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