All hail the free market

I know this isn't going to go over well with lots of you, but regulation to prevent that hotel's actions would be ill-advised. A disaster of this sort creates a spike in demand -- the number of people willing and able to pay for a room. How are the competing claims for the rooms to be sorted out? Without the price mechanism, the rooms don't go to those who value them most. Rather, they go to those who got there first. They go to those who had other options that, with rooms at only $250 a night, weren't as relatively attractive as they were with rooms at $999 a night. Ultimately, precious resources do not find their best, most-valuable use.

The problems with price-gouging regulation is even more pronounced when you talk about resources for which there isn't a fixed supply. Bottled water, plywood, bagged ice ... letting prices rise to their natural level prompts suppliers of these resources to produce even more than usual.

Ultimately, the effect of prohibiting price-gouging is a greater gap between that which is being demanded and that which is being supplied.

 

It wasn't so nice a time for the guys working for Con-Ed. My brother was a subcontractor taking care of the emergency generators. They all had to sleep in the trucks because if they were parked alone for any length of time, they would be stripped. These aren't even tools most people would use, they were industrial-size things that I doubt you could even pawn.

 

Our town has 2 gas stations. Day of storm one ( owned by American) jacked up their reg price from 4.19 to 4.39. The other ( owned by Middle Eastern guy) dropped their price to 4.09.

.30 cents per gallon difference - can't believe anyone would still be pumping up at the 4.39 guy but they are.

 

You sound like the guy who wrote a few years back, when the new Yankee Stadium was opening, that the only true fans were the ones forking over $3,000 for tickets, because if other people liked the team that much they'd be willing to pay it.

 

Maybe so, but who is going to enforce it?

Say for example, Long Beach Island in New Jersey is evacuated, as it was for Hurricane Irene. There is only one way off that island, which likely means long traffic jams. Are the cops really going to be busting a gas station's balls for charging $20 a gallon when they have to get thousands of people off an island in a short time?

 

Hell, they were *giving* stuff away during Katrina.

 

I see this side of things, but the response still lacks some of the complexity necessary to come up with the optimal policy solution. Hotels, for instance, won't necessary go to those that value them the most, but to those that value AND can afford them. People's relative level of wealth will, therefore, obviously have a large impact on their "bidding" strategies, perhaps limiting the value of the free market as an information revealing resource.

Many people make similar arguments about public parking. The lack of available spaces usually leads to complaints that parking is "underpriced". But it seems to me that we might prefer this "inefficient" allocation of parking spaces-randomly awarded based on timing-versus a purely price-drive system, because it is more "fair."

 

You must not know how it works. The government comes back after a disaster and fines the companies. It is not regulated at the moment it happens. Police have no authority to make then lower the price.

And you are damn right the government should, and thankfully does, stop people for profiting on disasters. People are losing homes and lives. It is not time to adjust prices to 5, 10, 100 times that of normal. It's one of the bonuses of having a good society. We don't fuck each other over in times of great need when the need is from a cause not of their own.

 

I basically agree, but I'm not so sure in regards to this hotel.

Letting prices rise on water, plywood, etc. means that companies and/or people have an incentive to get those items into a disaster area.

If prices are capped, they won't be able to make any money. Once the original supply runs out, that's it.

But, hotels are basically a fixed supply.

Now, to some degree, allowing them to charge whatever means that people who really need them will be able to find a room. But, since $1,000 a night is more than many can afford, it only means rooms are available to folks who really need them, and have a lot of money.

Then again, as Bubbler points out, shitty hotels all over the country gauge you on college football weekends or for other big events. (Try booking a room during the Super Bowl or Presidential Inauguration without agreeing to a minimum night stay and paying through the nose.)

 

Welcome to Ma$ter$ Week in Augusta.

Almost all local restaurants have their regular menu and the Masters menu. Hotel prices double or triple.

Supply vs. Demand.

 

I agree generally, but I'll just add that a time of crisis and a time of high demand are two different things. Any traveler knows he'll pay more for a room in touristy areas during peak seasons (Mardi Gras in New Orleans, Spring Break in Cancun, etc.), but you'll get great bargains during the off-season.

That's just marketing.

But a time of crisis is different, not really comparable.

 

We're supposed to have regulations on price gouging.