A gas sta­tion was accused of price goug­ing last year for rais­ing prices to over $5 per gal­lon when Hur­ri­cane Ike was pass­ing through.

An ever­green story around the time of hur­ri­cane sea­son is price goug­ing, some­times referred to as prof­i­teer­ing. In most eco­nomic cir­cles, though, prof­i­teer­ing is a super­set of price goug­ing, includ­ing such other prac­tices as price fix­ing or collusion.

The key ele­ment of price goug­ing is the sud­den increase in price of an essen­tial good or ser­vice due to an expected or actual civil emer­gency. The prac­tice itself is ille­gal in some states, notably Florida, a state with a long his­tory of fre­quent and severe hurricanes.

Clearly there are social con­cerns regard­ing goug­ing, and many peo­ple feel that it’s uneth­i­cal from a purely social per­spec­tive. But that’s not what I’m talk­ing about today. Today, I’d like to ask if the price increases are so bad from an eco­nomic point of view? Let’s exam­ine this fur­ther to see. (more…)