Design Translation – Simulation
1. Price Gouging – Florida Hurricanes
In the wake of the 4 major hurricanes that ravaged the State of Florida in 2004 the following statute was adopted into law:
Florida Statute 501.160 states – it is unlawful during a state of emergency to sell, lease, offer to sell, or offer for lease commodities, dwelling units, or self-storage facilities for an amount that grossly exceed the average price of the commodity the thirty days before the declaration of the state of emergency unless the seller can show increases in its prices or market trends justifying the price. Examples of necessary commodities are food, ice, gas, oil and lumber. This is a civil crime enforced by the Attorney General, the Department of Agriculture and Consumer Services and State Attorney.
Under the law, evidence of price gouging was explained as follows: the law compares the price of the commodity or service to the average price charged over the 30 day period prior to the declared state of emergency. If there is a “gross disparity” between the prior price and the current charge then it is price gouging.
For each of the following apply either or both of the following perspectives:
Deontology: The morality of an action is determined by duty; adherence to given rules. Intentions are more important than consequences.
Consequentialism: The morality of an action is determined by the specific results of that action. The major application is Utilitarianism.
i. Do you believe that the FL Statue is grounded in moral theory? Which of the above, either or both, guides your answer? Explain.
ii. Discuss the likelihood of “Unintended Consequences”. Introduce the concepts of risk
iii. From a consumer perspective, is there any positive aspect to price increases following a disruptive event such as a major hurricane? Explicitly incorporate market segmentation into your discussion.
iv. If you were a member of the FL State Legislature standing for re-election, would you have voted “YES” or “NO” on the above statute? Briefly explain.
2. This question is based on the Jones.Blair case which we have not discussed but is in your Course Casebook. You are NOT required to read the case. The analysis below is derived from personal interviews conducted by a Market Research firm.
Extra Credit (5 points).
There is much concern about the ability of the Social Security System to deliver the promised benefits, especially as the impact of the ongoing retirement of the “Baby Boomers” is factored in. Born in 1946, the first year of “Baby Boomers” are now eligible for full retirement benefits in the Social Security System. One possible modification to the SS System is to allow individuals to have their own individual accounts (similar to a 401(k)). An English major friend of yours asks your “CBA” advice on this proposal. Given your knowledge of economics and demographics what would you tell her? In the final paragraph of your answer you can direct your ideas more specifically to me if you wish.