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More on Price-Gouging

My friend Roger Meiners, Professor of Economics at UT-Arlington and Senior Associate at PERC, sent the following e-mail note to me in response to my post on price-gouging:

A good example of price gouging is the common practice of movie stars to jerk their price way up to appear in another movie based on high demand for their last movie. I have heard that some of them get $20 million for several weeks or months’ work!!

Yet another example of so-called price-gouging might be the sale of a house at a real price far above what the current owner paid for the house. A home I know in northern New Jersey was purchased for about $40K in the early 1970s. Today it could probably sell for about $450K. Even adjusting for inflation, the value of this home has skyrocketed. And while some of the increased value is attributable to the current-owners’ efforts – they take excellent care of the house and have modernized it — the bulk of the increase in market value of the home is due to the higher demand to live near Manhattan. That is, the current owners were fortuante enough to purchase a home in a location that has increased significantly in value over the past three decades.

Would anyone accuse the owners of this home of price-gouging if they sold it for the highest price they can fetch for it?