CR Denning is a sophomore studying philosophy.
As I write this, my house is without internet connection. It stopped working late yesterday, and I spent half an hour on the phone navigating a robo-menu before getting a human on the line just to find out good ole’ Ma Bell couldn’t dispatch a technician until sometime “before noon” today.
At least I’m not a Comcast customer, having to worry that some unscrupulous customer service rep is going to change the name on my account to “Asshole Brown.”
Later this year, however, I’ll have another choice of internet provider: Google. The Silicone Valley-based company is bringing Fiber, its high-speed internet and TV service, to the Triangle.
With internet speeds 40 times faster than my current hookup, and at a similar price point, the incumbent ISPs will be forced to adapt—or suffer the same fate as every other dinosaur.
Competition is a beautiful thing, ain’t it?
It’s easy to see what the benefit competition brings to the market for consumer goods and services. When companies like Comcast hold monopolies, consumers end up stuck with shitty services and bloated prices.
It just seems fair that companies should fight for our business. Competition keeps prices low and spurs innovation.
But what about competition between consumers?
The public, and the policymakers they elect, deride—or even ban—the practice of “price gouging,” or raising prices in times of high demand. After Hurricane Sandy, people complained they were being ripped off as prices of goods, like generators and the gas required to run them, soared.
It just doesn’t seem fair businesses charge higher prices when supply is scarce. Some people think it’s immoral. That it’s nothing more than taking advantage of people in a time of need.
Which brings me to Uber: I recently overheard some classmates discussing the ride-sharing startup, complaining about the exorbitant prices for rides on New Year’s Eve. In times of high demand, like New Year’s or during a snowstorm, Uber uses an algorithm to raise prices up to ten times its base rate.
After a Durham man got stuck with a $455 bill from Uber on Halloween last year, the North Carolina Attorney General’s office announced it would be investigating whether Uber’s pricing scheme is “price gouging,” which is prohibited in N.C.
Unfair as the practices seem, whether it’s Uber charging more for rides on a busy night or hardware stores charging more for generators in a snowstorm, raising prices in times of high demand creates competition.
If you’ve ever placed a bid in an online auction, you’ve experienced how competition between consumers works. Supply is limited, so the person willing to pay the highest price wins. We don’t normally view eBay auctions as immoral, so why do we seem to make moral judgments when the same type of competition happens elsewhere?
Part of the answer, I think, comes from the feeling the suppliers, rather than consumer demand, drive up prices.
The bigger issue for most people, though, seems to come from the level of need people have for the product or service in question. I don’t need that new iPad on eBay in the same way someone trapped in a snowstorm needs a generator. When the in-demand good is a necessity, it feels like suppliers are taking advantage by raising prices.
If we’re going to make moral judgments, it’s important to look at the interplay between rising prices and need. If a storm knocks out my power, I might need a generator to keep warm. At regular prices, I’d be willing to buy one, but if demand causes the price to double, I might tough it out with some blankets.
But what about the couple down the street with a new baby? They’re willing to pay the higher price for that generator because, for them, it’s an issue of safety rather than comfort. If prices remained static, and I got to the hardware store first, they’re out of luck.
Same goes for Uber—it’s no fun to wait an hour for a taxi when demand is high, but it’s worse for the woman going into labor who needs to get to the hospital.
“Surge pricing” or “price gouging,” or whatever you want to call it, keeps supply from running out, so those with a greater need can have that need fulfilled.