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If your baby needs formula, and the supply is disrupted, the choices are generally, with price gouging, you wouldn't be able to feed your baby because the formula is too expensive, and without price gouging, you wouldn't be able to feed your baby, because you didn't get to the store while they still had it. With feeding babies, there are other options to feeding formula for many babies. The question is which option gets more formula to babies that don't have good other options. With price gouging, the parents of babies with options may have a threshold price, maybe they're willing to pay normal price but no higher, or 2x normal price or whatever. As prices rise, demand from this population will drop, but demand from babies without good other options is rather inelastic, so a lot of the formula will go to babies without good options. With a fixed price, the demand can't be fulfilled because supply was disrupted, and distribution is essentially random. Some babies who didn't get formula have other good options and will be fine, other babies don't and will have a big problem. You could probably design a better way to distribute the formula than either price based, or random based, but it would require a lot more coordination, and since you need to do it for lots of goods in a crisis, some of which are needed on a daily basis, it's hard to set that up. |
Not quite. With price gouging, even fewer people get formula because there is a strong incentive to hoard and withhold supply until the price creeps up. Supply can’t ramp up quickly enough in emergency situations. It’s too inelastic for such short time horizons.
So with protections against gouging, people with the supply are incentivized to get as much of it as they can and move it into people’s hands as fast as they can. Without such protections they’re incentivized to hold onto to whatever they can and trickle it out at a metered pace. You just end up creating a speculative bonanza, not any meaningful increases in supply.