Saturday, November 3, 2012

A Story of Gouging, and Being Gouged...

From an old friend of mine, on prices and reactions...

My friend G and I had taken a whole passel of kids (mine, his, plus some random stray ones) to duck pin bowling while Hurricane Sandy bore down. Heck, we'd already stocked up on marshmallows and beer and, yes, gas, so what else would we do? 

 Between rolls, I tell G about your price gouging discussion (I believe you used the example of plywood), and how strongly some students reacted to the idea that plywood be rationed based on willingness to pay. 

 Then G tells me a story of his engineer friend who worked during the summers in college as a contract utility worker. There had been a big storm somewhere out-of-state, and as usual he and his utility truck were deployed to help restore power. The guy had been working hard, like 18 hrs a day, and no A/C to be had. It was the end of his shift and he really wanted some cold beer. 

Only one store in town still had power. So, he goes in to buy a 6-pack. The guy says, ""That'll be $30." "Whaaat?!? $30 for a 6-pack?!?" says his friend. The store owner says, "Well, where else are you going to get cold beer right now, buddy? Take it or leave it." 

 So G's friend buys the beer for $30 bucks. Then, he goes outside, shimmies up the utility pole, and cuts off the guy's power.

I completely agree that price is a logical way to ration cold beer, but this customer felt he'd been served beer -- plus a pile of something else, and how do you figure THAT into the transaction?

Here's what *I* think:

1.  The store owner was wrong to charge $30.  That's dumb.  The short run advantages are limited, and people are going to remember.

2.  On the other hand, if the price were less than $30, there is no way that beer would have been there in the first place.  The beer would have sold out, long ago.  And the premise of this story is that the guy really, REALLY wanted a beer.  Is $30 "too much"?  Without a price of $30, the price would have been infinity, because there would not have been any.  Several people likely came in, heard the price, and said, "no way." If the utility guy really wanted beer, he should thank the price system for helping him get some.  At regular prices, the beer would have been gone.  This way, at least he had the choice to buy beer.

3.  If you work for a utility, you can reward your friends and punish people who make you angry?  Really?  No rule of law, no due process.  People should just have to give you stuff, give you their property, or you will punish them.  And you are entitled to do so, because you can.  Even though the beer wouldn't even be there if the price weren't so high to others, this guy thought HE (being God's special snowflake) should get the beer cheap.  But if the storeowner could sell the beer for $30 to someone else, then the cost of selling it for $6 (which would have been acceptable to our electricity judge) is $24.  Why would the storeowner be obliged to give the guy $24?  Answer:  because he works for the power company and can PUNISH you!

(UPDATE:  On reflection, this may well be an urban legend.  A little too pat.  Still, an interesting hypothetical:  did the lineman act badly, or was he justified?  After all, now the store is closed to everyone, and the food will rot, just because the lineman didn't get the special treatment that he thought he deserved...)


  1. 4. What was the guy doing drinking beer and working with high-voltage electrical lines on tall utility poles whilst tired? There might be some Karma coming down the path the other way.

    (Actually the lineman was acting like a coercive protection racket except he forgot to tell the store owner in advance what would happen if he didn't get his way. D'oh!)

  2. It's beer, not water. The store owner should be able to charge whatever he wants as long as someone is willing to pay. Isn't that what a true free market is.

  3. At the Hilton in Amsterdam I believed I paid 20 euros for a Budweiser or some insane amount from the minibar.

    It was also Earth day and they wanted us to all turn off our lights and use oil lamps and candles.

    So I know about expensive beer in the dark.


Do you have suggestions on where we could find more examples of this phenomenon?