One of my former students (and a current FB friend) reminded me that I used to require this article by Karen Sellick in my intro economics courses. He also pointed me to this article by Art Carden which makes similar arguments.
Here's the gist of the defence that most economists make of price gouging:
- Firms that price gouge may lose goodwill, so jacking up prices may not be a wise long-term strategy for many firms.
- To the extent that prices rise during disasters, they encourage suppliers to ship things in from greater distances (with the higher prices signalling that increased transportation and transaction costs can be covered).
- To the extent that prices rise during disasters, they encourage buyers to cut back, to make do.
- To the extent that people expect prices might rise during disasters, that expectation encourages buyers and sellers to maintain larger precautionary inventories.
- Price gouging eliminates black markets, massive lineups, and the attendant illegal and anti-social behaviours.