There has, for quite a while, been a nagging part of me that was bothered by rules against price gouging. Yes, you read that correctly. I’ve pretty much been firm in my belief that if the market dictates $10.00 a gallon for gas, we shouldn’t try to calm that with regulation. Price fixing is a separate matter, of course. The only thing I hadn’t done was really thought about why I leaned that way.
Luckily Judge Posner has put that down fairly succinctly over on the Becker-Posner blog. Good stuff.
October 27th, 2005 at 11:07 pm
He makes a valid point for most areas of the U.S. I’m sure in some parts of the Nevada desert, gas stations come every 50 or 100 miles. In this rather unique type of case, a gas station could easily say “$17/gallon or go dry,” and people would pay even if the price at the next station were $2.50.
This is just a hypothetical… I haven’t heard of this kind of behavior recently. I’m sure, just like his example with common law, a court would hold such a gas station accountable.
As a side note, do you feel that the association formed by way of price fixing is, in essence, different from a monopoly?
October 27th, 2005 at 11:22 pm
That’s not a gouging situation… the market would fix that problem by opening a new gas station. I doubt a court would find them guilty of gouging (though it would depend, this is not legal advice, I am not a lawyer)
Also, that association you’re talking about isn’t a monopoly, it’s a trust. So, yes, I think that’s different from a monopoly.
October 28th, 2005 at 7:33 am
I was just thinking of the Microsoft issue, where a few years ago alot of people hoped for the breakup penalty. While that might spark competition, it would seem that the new split companies would have incentive to form a secret trust. Isn’t that harder to prosecute?
October 29th, 2005 at 12:03 pm
They tend to keep a pretty close eye on the companies they’ve broken up. Under such heavy penalties, I highly doubt the rational actor would risk the costs that would go along with ANOTHER antitrust violation.