Jacob Goldstein gets my Blogging Hero ‘O the Day award. Despite being “holed up in (his) Brooklyn apartment with (his) wife and (their) two daughters” during Hurricane Sandy, the NPR Planet Money reporter managed to write a good post on why most businesses don’t price-gouge their customers in the middle of a disaster.
The answer, it turns out, doesn’t have as much to do with kindness to customers during a crisis as it does market forces and a business’ bottom line.
Goldstein uses a 1986 academic study on prices and fairness to explain:
“The people … surveyed said they would punish businesses that raised prices in ways that seemed unfair. While I would have paid twice the normal price for my groceries yesterday, I would have felt like I was getting ripped off. After the storm passed, I might have started getting my groceries somewhere else.”
So while businesses might make a killing by raising prices on coveted supplies in the short term, they’ll lose money in the long term when their customers turn against them. Many states already have laws against price-gouging, Goldstein says, but often those laws aren’t even necessary thanks to this quirky principle.
Leave it to Planet Money to help explain the economy even while getting pelted by hurricane winds.