Madonna’s pub accused of price gouging

Saturday, August 09, 2008
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It sounds like a classic case of price gouging or price discrimination and it is a bitter blow for non-regulars at the pub owned by Madonna and Guy Ritchie. Several newspapers have relished the news that the Punchbowl in Mayfair has been charging different prices to different customers for the same drink - segmenting the market between regulars and occasional visitors. The Telegraph reports that Brian Richardson, 52, who has been a customer for 12 years, was charged £3.50 for a pint one day, and £3.90 the next. He said: “I was shocked. I complained to staff. They have got two prices - regulars prices and non-regulars prices.”

It is not often that I link to the business stories covered in the Daily Mirror - but here we go!

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Comments

I dislike the term “price gouging” since it automatically attaches negative connotations to the practice. Price discrimination would indeed be more scientifically accurate, and most economists would agree that there is nothing inherently wrong with charging different customers different prices due to differing demand curves. However, the general public don’t quite see it this way and has a moral repugnance towards “negative” practices of price discrimination such as Amazon charging regulars more by use of stored cookies (now stopped) or Apple charging more desperate people more for early iPhones (they apologised and offered rebate vouchers). However, the “positive” practices of price discrimination are ignored: lower fares for youngsters and OAPs, etc. and certain cases where it is simply “common practice” - hardcover books. I find it kind of odd that people would have double standards like this.

Now the ethical dilemma becomes murkier in situations such as this: after a flood, people have a greater need for supplies so is it justified for energy companies to raise prices in response to the changes in demand (as long as they don’t collude)? It would certainly provide incentives for more competitors to enter into the market, thereby increasing total supply in the long-run but it does also mean that the current supply is distributed rich first, poor last. What’s “fair”?

Posted by  on  08/12  at  06:31 AM

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