Thursday, July 5, 2007

Price Gouging

This website may be of great use in water-cooler debate among the economically illiterate: http://www.gasgouge.ca/.

However, that would be the sum total of its use. Checking the Canadian Centre for Policy Alternatives (CCPA) -sponsored
report that the website is based on, it not only miscalculates exchange rates (see p.2, para. 6), but does not document the methodology or the numbers used in deriving estimates of "normal" profit margins, to choose the most glaring example, or how an estimate of a 1-cent increase in gas prices for one day translates into a million dollars of "excess profit" for gas companies.

Basically, his report is nonsense. The fact that he has a master's degree in economics from a well-respected university (Wisconsin-Madison) is shocking.

The truth of the matter is that "price gouging" is fiction. Gasoline retailers do not posess the market power to charge more than competitive prices. And even if they were monopolists, they still wouldn't be able to arbitrarily raise prices to "gouge".

More thoughts on "price gouging" at
Econbrowser.

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