re: #48 Decatur Deb

Normal economic theory would suggest that if there’s higher demand for a good, that retailers would mark up the price accordingly, and supply and demand would reach an equilibrium. That isn’t happening because traditional sellers aren’t raising their prices because they think that buyers wouldn’t stand for it. But they’re not having any problem with those who are essentially scalping the ammo on alternative channels. That, they’re okay with.

An economics textbook would say this shouldn’t happen. It would say that Bob Viden, who has run the shop for almost 50 years, should respond to the increase in demand by raising prices. And some stores and online sellers have done just that. But, Viden told me, “We don’t want to do that. We want to be fair.”

Apparently so do some of the best-known ammo sources across the country. At the sporting goods store Cabela’s and at Wal-Mart, shelves are empty but prices are mostly flat. During my conversations at Bob’s Little Sport Shop, the word “fair” came up about two-dozen times. Or, as one customer put it, “There’s no reason to make a profit off of our misfortune.”

To a traditional economist, a shortage is evidence prices are too low. But Viden predicts if he raises his prices, his customers won’t come back because they’ll think he ripped them off.

“Traditional economic theory doesn’t really have room for fairness perceptions,” Margaret Campbell, a marketing professor at the University of Colorado, Boulder, told me. But about 30 years ago, she says, “people started noticing that there were these kind of quirks.”

In a famous study, the Nobel Laureate Daniel Kahneman and two colleagues found that people’s ideas of fairness are so strong that, even if it makes short-term sense to raise prices during a shortage, many retailers don’t. Campbell says that’s because when prices go up, consumers actually care about the reason behind the increase — the retailer’s motive.

“If a consumer sees a price go up in an unexpected fashion, they want to know, ‘Why? Why has it gone up?’ ” she says.

There are lots of reasons consumers approve of (if the price the store is paying for the goods has increased, for example). But research has consistently shown that a sudden increase in demand is not one of them. So rather than raise prices, Bob’s Little Sport Shop and other stores are rationing ammo in order to keep their customers’ loyalty.

No reason to make a profit off misfortune? Wait, what’s the misfortune - that there’s higher demand for a product? Not wanting to make a profit? Isn’t that anti-capitalist? What’s going on here - we’ve stepped off into bearded Spock territory. /