Irma price gouging highlights sad truth: Consumer fleecing is the new normal | WTOP

(THE CONVERSATION) Since Hurricane Irma put Florida in its sights, there have been thousands of reports of price gouging on everything from water to gasoline.

The most notable complaint was not, however, the one alleging a US$72 charge for a six-pack of water. Rather, it was the $3,200 reportedly asked by Delta for a ticket out of Florida.

That’s because it wasn’t actually hurricane-related price gouging. Airlines were charging similar fares to last-minute buyers two weeks ago – and have been for years – long before Irma became a threat.

The fact is that airlines have made it a routine practice to jack up prices at moments of peak demand, such as right before a flight, when Americans dealing with family or business emergencies are willing to pay almost anything to get on the next plane out of town.

By bringing desperation to so many, Hurricane Irma is revealing a sad fact about many American companies, and not just airlines: that they have come in recent years to embrace taking advantage of desperate consumers as a central part of their business models.

The practice, called dynamic pricing, is intended to ration scarce goods and services, yet, as I show in a recent paper, it primarily harms consumers by making it easier for companies to fleece them.

Until recently, American businesses rationed access to goods or services that are in limited supply on a first-come, first-served basis. A company would make a product and then choose a price that covers its costs, including a reasonable return for investors. The price wouldn’t change, even if that meant the product might sell out from time to time.

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Irma price gouging highlights sad truth: Consumer fleecing is the new normal | WTOP.