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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

Abstract: A pure exchange model in an Edgeworth box diagram is used to highlight the basic system of market ethics that is implicitly presumed in all neoclassical economic analyses. A pure exchange model introduces the central tenet of Adam Smith that self-interest motivated traders in a market can achieve mutually beneficial outcomes. But the model also displays outcomes that, while they would not be voluntarily chosen, are nonetheless achievable by the use of force, threats of force, or deception. As such the Edgeworth box is a vehicle to explain requisite ethical principles, including the importance of property rights and perfect information, by demonstrating the unfavorable outcomes that can arise when excessive self-interest (aka greed) is used to take advantage of others.

Keywords: Trade; Ethics; Pure Exchange; Edgeworth box (search for similar items in EconPapers)
JEL-codes: A22 D63 D86 F11 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2016-05
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Persistent link: https://EconPapers.repec.org/RePEc:gwi:wpaper:2015-21

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