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choosing between right or wrong

Oct 7, 2022

Whose Line Is It Anyway?

By:Dylan Ratigan

We live in a market-based economy. If you have a product or service for sale and there is demand, eventually supply and demand will meet at a price point. So long as the market is liquid, no one has an advantage. No one can manipulate price into perpetuity. Most of the time, it works pretty well. Until it doesn’t.

From time to time, the demand for a product or service can artificially or temporarily surge. Take the recent hurricane for example. As homes were decimated or lost power, people scrambled to secure hotel rooms in Florida. Demand far exceeded supply. It would be very easy for a hotel owner normally charging $300 per night to increase prices two, three, even four times. If the demand supports the price increases, should owners increase price? At some point, the question isn’t just one of supply and demand, but it’s a question of right and wrong.

Morally, most of us would likely say it’s not right to raise prices for hotel rooms in Florida. But how far should that zone extend? If people wanted to get out of Florida altogether, is it morally wrong to raise prices in Chicago or Los Angeles as demand surges? What about the cost of power generators in Wyoming? 

If you’re purely a market-based opportunist, there’s a case to be made that one person’s disaster is another person’s payday. For the small business owner, struggling to make ends meet that suddenly sees a surge in demand, should she not raise prices that might ultimately mean the difference between staying in business versus having to close down and lay people off? 

In a perfect world, we could delineate between what is essential and what isn’t. It would provide moral clarity upon which we could all agree with respect to pricing. Unfortunately, that isn’t the world in which we live. Sure, certain items like water are a no brainer. However, even food can be ambiguous. Maybe certain foods are essential while other foods are more of a delicacy. Who gets to decide that though? 

I wish I could say I have an easily identifiable solution for all this. I wish it were black and white. But the fact of the matter is, there is moral ambiguity and questions more complex than, where do supply and demand meet. I suppose that ultimately, it’s up to us to decide where to draw these lines and when to move them if necessary.

Special Projects writer Josh Fabian contributed to this article.

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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