Price Gouging

New York Law: Price gouging is illegal and considered an “unconscionably excessive price” during an “abnormal disruption of the market.”

“Our office has zero tolerance for price gouging,” said Attorney General Schneiderman. “We are actively investigating hundreds of complaints we’ve received from consumers of businesses preying on victims of Hurricane Sandy, and will do everything we can to stop unscrupulous individuals from taking advantage of New Yorkers trying to rebuild their lives.”

Gas Shortages Anti-gouging laws say suppliers cannot increase price by more than 10% in New Jersey

Who Benefits from Anti-gouging laws? New York passed first one passed in 1979 b/c of heating costs 31 states now have anti-price gouging laws Suppliers? Consumers? Then who? Politicians

Free Trade Zones? Free-trade zone in gasoline. Allow prices to rise without control. See how quickly gasoline gets restored to empty stations in the free-trade zone, see how short the lines shrink.

No laws…all good? Hoarding equilibrium If gas stations did not increase their prices because of consumer goodwill There would be hoarding and a shortage If all stations raised price because of increased demand, clearing price would be higher, supply would stay intact and thus no hoarding or shortage

Gov. Cuomo – Hero? Cuomo said the Defense Department was sending in 12 million gallons of fuel to be pumped from five mobile stations. “They’ll have a 10-gallon limit,” the governor said. “The good news is, it’s going to be free.”