MRKT 661 Week 5 DB Forum 2 Replies Example

Discussion Board Forum 2 Replies: Price Gouging and Drip Pricing

MRKT 661 Ethical and Legal Issues in Marketing, Discussion Board Forum 2 Replies

Thread by [Student Name]

The classmates and their threads are composites standing in for the course's own forum; the scholarly sources, the federal rule and the textbook are real; the requirements follow Liberty's public course guide for MRKT 661.

Reply to Hannah

Hannah, your thread described a hardware chain that doubled its generator prices in the two days before a hurricane reached the coast, and you argued that state price-gouging laws should be broadened to cover the days before a declared emergency. Your concern for families who need power for medical equipment is well placed. I want to add, though, that scholars are deeply divided on whether price-gouging laws help the people they are meant to protect.

Zwolinski (2008) argues that the common moral condemnation of price gouging is largely mistaken. He challenges three beliefs: that laws against gouging are justified, that gouging is wrong even if it should not be illegal, and that it reflects poorly on the seller's character. His central point is that high prices after a disaster ration scarce goods and draw new supplies into the area, so that laws capping prices can leave people without goods at any price. Culpepper and Block (2008) make a similar economic argument about Hurricane Katrina, contending that government limits on emergency prices rest on the premise that officials can allocate goods better than markets, and that such limits discourage suppliers from bringing generators and fuel into stricken areas.

Snyder (2009) defends a position closer to yours, though on different grounds. After reviewing anti-gouging statutes and the economic case for price increases, he argues that what is wrong with gouging is a failure of respect for persons: when prices for essential goods rise sharply after a disaster, access to those goods depends on wealth, and people with urgent needs but little money are shut out. On this view, the problem is not high prices as such but the unequal access they create to goods that people need to survive.

The two positions suggest a middle path for the hardware chain and for policymakers. The chain could raise prices modestly to reflect higher costs and demand while limiting each customer to one generator and reserving part of its stock for customers with documented medical needs. State gouging statutes often rely on open-ended terms such as "unconscionable" or "excessive" prices, which leave courts and attorneys general room for judgment. Policymakers could use that room to focus on rationing and access rather than only on price levels, for example by protecting purchase limits and reserved stock from being treated as unlawful discrimination among customers. Extending the statutes to the days before a declared emergency, as you propose, might help families like the ones you described, but the research suggests it could also leave shelves empty sooner.

Do you know whether the chain's doubled prices brought more generators into the region, or whether stores simply sold out faster at higher prices? The answer would help test Zwolinski's argument in your case.

Reply to Tyler

Tyler, your thread argued that the ticketing site you studied misleads buyers by showing a $68 ticket price and adding $19 in service and facility fees only at checkout, and you called the practice deceptive even if every fee is disclosed before payment. Research on partitioned pricing strongly supports your concern.

Morwitz et al. (1998) studied partitioned pricing, in which a price is divided into a base price and a mandatory surcharge, and found that partitioned prices reduced consumers' recalled total costs and increased demand compared with an all-inclusive price, with the way the surcharge was presented affecting the result. If buyers remember paying less than they did, the separation of the fee works in the seller's favor at the buyer's expense.

Greenleaf et al. (2016), reviewing research on partitioned pricing, describe how consumers often underweight surcharges, especially when the base price is presented first and the fees later. The ordering in your ticketing example follows that pattern. A large field experiment then showed what happens when the order is reversed. Blake et al. (2021) analyzed an experiment on the ticket resale site StubHub and found that showing fees upfront reduced both the number and the quality of tickets purchased, compared with showing them only at checkout. Buyers who saw the full price earlier bought less, which suggests that late fees led others to spend more than they would have chosen to spend with full information.

The law has moved toward your position. A Federal Trade Commission fee rule adopted in 2024 now covers exactly this situation: sellers of live-event tickets, along with short-term lodging, must lead with the all-in price, mandatory fees included, the first time a price appears (Federal Trade Commission, 2024). Deception analysis under the Federal Trade Commission Act has long asked what overall impression a presentation leaves on a reasonable consumer, and a $68 headline price for an $87 ticket leaves a misleading one. Under the new rule, the site would need to show $87 from the start, and it could still list the components of the price, so long as the total comes first and is at least as prominent.

The research also suggests a business case for complying willingly. If upfront prices reduce purchases in the short run, as the StubHub experiment found, they may also reduce the anger buyers feel at checkout, a feeling that research on price fairness links to complaints and switching. A site that shows the real price first may sell fewer tickets per visit but keep more of its customers over a season.

Did the site in your thread change its display after the rule took effect? If it did, comparing its sales before and after would offer a natural test of the StubHub findings.

References

Blake, T., Moshary, S., Sweeney, K., & Tadelis, S. (2021). Price salience and product choice. Marketing Science, 40(4), 619-636. https://doi.org/10.1287/mksc.2020.1261

Culpepper, D., & Block, W. (2008). Price gouging in the Katrina aftermath: Free markets at work. International Journal of Social Economics, 35(7), 512-520. https://doi.org/10.1108/03068290810886911

Federal Trade Commission. (2024). Trade regulation rule on unfair or deceptive fees, 16 C.F.R. Part 464.

Greenleaf, E. A., Johnson, E. J., Morwitz, V. G., & Shalev, E. (2016). The price does not include additional taxes, fees, and surcharges: A review of research on partitioned pricing. Journal of Consumer Psychology, 26(1), 105-124. https://doi.org/10.1016/j.jcps.2015.04.006

Morwitz, V. G., Greenleaf, E. A., & Johnson, E. J. (1998). Divide and prosper: Consumers' reactions to partitioned prices. Journal of Marketing Research, 35(4), 453-463. https://doi.org/10.1177/002224379803500404

Snyder, J. (2009). What's the matter with price gouging? Business Ethics Quarterly, 19(2), 275-293. https://doi.org/10.5840/beq200919214

Zwolinski, M. (2008). The ethics of price gouging. Business Ethics Quarterly, 18(3), 347-378. https://doi.org/10.5840/beq200818327