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Moral Dilemmas:
Price Gouging and Internet Advertising
Price Gouging: Is it good for
suppliers or consumers? Or both?
What is Price Gouging?
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.


Some might believe that price gouging is when suppliers are benefiting from a short-term
change in the demand curve or when prices rise higher than what a consumer wants to pay
or considers fair or reasonable.



Basically, it is an increase in prices that are not justified after a supply or demand shock
during an emergency.
Price Gouging: State of Emergency
                  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.
Is Price Gouging Unethical?
Can Everyone Benefit?
 Most suppliers benefit from price gouging but is
there a positive aspect to price increases during a
                           hurricane for consumers?

Numerous economists have explained that price gouging is beneficiary to many people, not just the suppliers.

When individuals are concerned about the availability of resources, they stock up and buy as much as they
can. This eventually leads to a shortage of supplies.

Without price gouging laws, suppliers have the incentive to bring goods and services to the affected area so
not only is there more goods, but the increase stops consumers from buying more than they need.

Regardless of price gouging, competition would decrease prices to the most affordable but demanded price.
Super Bowl & Hotel Rates
                                                              A Saturday night stay at a particular
                                                               South beach hotel ran for $99 in the
                                                               middle of January. Two weeks later,
                                                            during Super Bowl weekend, the same
                                                                     exact room rented for $800.


Some cities asking companies to refrain from gouging Super Bowl week.

If prices can be held down down, owners believe more tourism will result which will ensure more profit



          One might differentiate the difference between price gouging and a supply and demand principle
            by determining if one is in a state of emergency and if it is a necessity rather than a luxury.
eBay: Secondary iPad Market
                             Several units ended up on
                             eBay auctions selling from
                             $2,000 - $4,000.




                             Other units were sold
Families were in line for    overseas for $1,700 - $2,000
hours to buy up all of the   where the iPad was not
units and re-sell them for   released yet.
astronomical prices.
Is Price Gouging for Apple iPads Unethical?

           Price Gouging for Non-Necessities (Luxuries)




 Price gauging for the iPad is based on the supply and demand economic concept.



 Electronics are considered luxuries and third type necessities.



 Apple followers are willing to pay thousands for the latest gadget.
Is Price Gouging for Apple iPads unethical? (cont.)


                           Price Gouging for Necessities




            Price gauging for necessities in a state of emergency is considered unethical.

 It’s unethical when suppliers exploit an imbalance in supply in their favor by selling necessities for
                                           new higher prices.

      Individuals of all social classes are forced to buy necessities for double or triple the price.
Internet Advertising:
Cookies, Pop-Ups & Spam
Cookies
Do you like cookies? We have all types of cookies and almost everyone
loves them. Check this one for example:




  The cookie in the picture won’t harm you, but the other kind you can’t find in
         your oven are the ones that you should really be careful about.
                     They are called: INTERNET COOKIES
What are Internet cookies and how are these
     cookies used in your computer?




           Cookies are small files downloaded on to your computer whenever you visit a website.

 They are used by advertisers to track the users personal info and provide them with types of things the user
                                  likes whenever he or she visits a website.

            Next, flashing banners or ads are added to the users website to attract their attention.
Why are the
 Do we have
                                           marketing firms
any privacy?
                                            using cookies?

Some websites care about people’s
privacy and they will not allow
access to people’s personal data.
However, as soon as someone             In order for marketing firms to sell
attempts to keep records or use         their products, they have to use
tracking devices on other people,       cookies to receive information on the
privacy rights become an issue.         websites visited by a user. After
                                        getting this information, they send
                                        flashing banners and ads to the
                                        user’s most visited websites in order
On the other hand, some websites
                                        to attract attention to their products.
that use cookies can lead advertisers
directly to someone’s personal info.
How is this helping
     the marketing firms                     Morally right
       or advertisers to
                                              or wrong?
         gain profits?

By    Knowing   someones     personal    Advertising a product is good, but

data, it is easy for an advertiser to    tracking someones personal data is

send his ads to the website that the     morally   wrong.    Advertisers   are

person visited most. Once they catch     making profits out it by sending their

that customers attention, and the        flashing banners to the customers

customer click their banners, they       and some of these banners might be

start interacting with the customer by   false and contain viruses that help

introducing them to their products       hackers get personal info.

and making offers to buy their

products.
Pop-up Ads = Annoying?
All about Pop Ups
First introduced in the mid 90’s.



Marketers from all over the world started using this method.



They soon became overwhelming and annoying to the
consumers.



Due to the annoyance, pop-blockers were introduced by internet
giants (Yahoo, Google, and Microsoft).
What happened to pop-up ads?
Was this a proper way to advertise?
Pop up ads are still around.           Pop-up ads began to have a more
However, they are not as annoying as   negative impact than it did a positive
before.                                one.

Some organizations have stopped        Many organizations realized this
using them and a lot of software is    way of advertising was giving their
currently out that stops these ads.    brand/company a negative image.



Marketers and World Wide Web
guru’s have found other ways to
advertise through the internet.
What is Spam?
            What types of Spam is there?
Spam   is   the   use   of   electronic   While the most widely recognized form of
                                          spam is e-mail spam, the term is applied to
messaging systems (including most
                                          similar abuses in other media:
broadcast media, digital delivery
systems) to send unsolicited bulk         Instant messaging spam
                                          Usenet newsgroup spam
messages.
                                          Web search engine spam,
                                          Spam in blogs,
                                          Wiki spam
                                          Online classified ads spam
                                          Mobile phone messaging spam
                                          Internet forum spam
                                          Junk fax transmissions
                                          Social networking spam
                                          Television advertising
                                          File sharing network spam.
Spam Marketing. Why?
 Spamming remains economically viable because advertisers have no operating costs beyond the management
 of their mailing lists, and it is difficult to hold senders accountable for their mass mailings.

 Spammers are numerous, and the volume of unsolicited mail has become very high. In the year 2011, the
 estimated figure for spam messages is around seven trillion.



Lets say I want to send an advertisement to 1,000,000 “targeted” people:
     -To send by regular bulk mail, it could cost around $200,000 - $300,000

     -To send by email, it might only cost $1,000
                  -i.e: the cost to buy a list of email addresses harvested from web sites, mailing lists,
                  chatrooms, and news groups are a lot cheaper.


Then there are Dictionary Attacks:
     -Try a lot of plausible address combinations
     -Keeping the ones that don’t bounce back
     -Puts added strain (bandwidth) on the network
Categorical Imperative
                      Categorical Moral Imperative Ethical View



 -Act guided by moral principles that can at the same time be used as base for a universal
   code of law


 -Act so that you always treat both yourself and other people as ends in themselves; never
   purely as means to an end.


 Scenario:
   Suppose I have a great new product that I wish to advertise. I send an unsolicited email to a
   large group of people knowing that only a tiny fraction is interested. It is not ethical as if
   everyone sent spam, it would render email useless. Everyone pays for email access and should
   not have their services rendered useless.
Rule Utilitarianism                                                                   Act Utilitarianism

      Rule
U'litarian
Evalua'on:                                                     Act
U'litarian
Evalua'on:


      ‐We
should
adopt
moral
rules
which,
if
followed
by
everyone,
will

         lead
to
the
greatest
increase
in
overall
happiness.                         ‐An
ac'on
is
right
(or
wrong)
to
the
extent
that
it

                                                                                        increases
(or
decreases)
the
total
happiness
of
the


      Scenario:
Products
being
adver3sed,
where
only
a
small
frac3on
of


              affected
par'es.

          









targets
are
known
to
be
interested.

                                                                                     Scenario:

                                                                                        A
product
that
costs
$10
to
make,
is
sold
for$25,

                                                                                        purchasers
value
at
$30.
      








What
if
only
1%
of
all
small
businesses
in
the
US
emailed
you
1          


‐
(i.e:
their
derived
happiness)
               
Spam
adver'sement
per
year?


                   There
are
24,000,000
small
businesses
in
America                           100
million
bulk
messages
sent
cos'ng

                                                                                                those
who
receive
it
and
are
not

                                                                                                interested.
                   1%
=>
240,000
emails
per
year
                                                                                              As
a
result
each
of
those
has
$0.01
of

                                                                                                unhappiness
('me
wasted).
                   240,000
/
365
=
657
emails
per
day
for
each
person
                                                                                              10,000
customers
purchase
product
and
get

                                                                                                full
happiness.

                                                                                 ‐Profit
for
business
=
$150,000
So
is
using
Cookies,
Pop‐Ups
or
Spam
ethical
under
Rule
U'litarianism?

         ‐Customer
benefit
=
$300,000
‐
$250,000
     ‐No,
because
the
usefulness
of
these
would
be
very
minimal!
                ‐Unhappiness
=
99,990,000
*
$0.01
=
$999,900
Final Marketing Presentation
Basically.....
Price gouging occurs when the wake of an emergency causes sellers of a certain necessary good to sharply
raise prices beyond a normal specified selling cost.

In the United States, there is no anti-gouging legislation (besides during a state of emergency). Although one
bill has passed the House of Senate focusing on price gouging gasoline.

Some people believe that price gouging is unethical while some economists believe that it can greatly benefit
someone in desperate need.

To an extent, price gouging can serve moral goals by promoting effective allocation of insufficient resources
and reducing shortages during times of emergency, overall creating economic incentives that will lead to
increases of supplies to desperate populations.

When thinking about price gouging, make sure you decipher the difference between a luxury and a necessity.
         -We all need water during a hurricane, but are getting super bowl tickets a life or death situation?
And.....
When it comes to Internet advertising, it is unethical to make false claims and bait-
and-switch offers.

Cookies, Pop-Ups and Spam all occur without the permission of the receiver and it
is not considered an appropriate or moral way to advertise.

The Internet Advertising Bureau is trying to develop guidelines for a ethical
framework of advertising on the Internet.

Using Cookies, Pop-Ups and Spam are unethical ways to advertise under the rule
utilitarianism because the usefulness of this Internet marketing is very minimal.

When advertising, it’s important to keep the categorical imperative in mind and
keep moral principles in mind at all times.
QUIZ TIME !
1. To determine price gouging, the law compares     3. Are Cookies, Pop-ups or Spam ethical under Rule
the price of the commodity or service to the        Utilitarianism? Why?

average price charged over how many days
                                                    A) Yes, they can be used by anyone, therefore, it is
prior to a state of emergency?                          ethically allowed
                                                    B) No, they would diminish the usefulness that the
A) 7                                                     media used to solicit it
B) 15                                               C) Yes, it allows anyone to make profits upon use
C) 30                                               D) No, they would allow equal happiness by all
D) 45                                                  recipients




2. Many economists believe that price gouging can   4. Which forms or means of Internet advertising do
benefit:                                             many receivers find inappropriate or even
                                                    deceitful?
A) Suppliers
B) Consumers                                        A) All forms of Internet marketing
C) People in affected areas                         B) Pop-ups, Spam, and Cookies
D) All of the above                                 C) Email lists you’ve signed up for
                                                    D) None

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Final Marketing Presentation

  • 1. Moral Dilemmas: Price Gouging and Internet Advertising
  • 2. Price Gouging: Is it good for suppliers or consumers? Or both?
  • 3. What is Price Gouging? 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. Some might believe that price gouging is when suppliers are benefiting from a short-term change in the demand curve or when prices rise higher than what a consumer wants to pay or considers fair or reasonable. Basically, it is an increase in prices that are not justified after a supply or demand shock during an emergency.
  • 4. Price Gouging: State of Emergency 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.
  • 5. Is Price Gouging Unethical?
  • 6. Can Everyone Benefit? Most suppliers benefit from price gouging but is there a positive aspect to price increases during a hurricane for consumers? Numerous economists have explained that price gouging is beneficiary to many people, not just the suppliers. When individuals are concerned about the availability of resources, they stock up and buy as much as they can. This eventually leads to a shortage of supplies. Without price gouging laws, suppliers have the incentive to bring goods and services to the affected area so not only is there more goods, but the increase stops consumers from buying more than they need. Regardless of price gouging, competition would decrease prices to the most affordable but demanded price.
  • 7. Super Bowl & Hotel Rates A Saturday night stay at a particular South beach hotel ran for $99 in the middle of January. Two weeks later, during Super Bowl weekend, the same exact room rented for $800. Some cities asking companies to refrain from gouging Super Bowl week. If prices can be held down down, owners believe more tourism will result which will ensure more profit One might differentiate the difference between price gouging and a supply and demand principle by determining if one is in a state of emergency and if it is a necessity rather than a luxury.
  • 8. eBay: Secondary iPad Market Several units ended up on eBay auctions selling from $2,000 - $4,000. Other units were sold Families were in line for overseas for $1,700 - $2,000 hours to buy up all of the where the iPad was not units and re-sell them for released yet. astronomical prices.
  • 9. Is Price Gouging for Apple iPads Unethical? Price Gouging for Non-Necessities (Luxuries) Price gauging for the iPad is based on the supply and demand economic concept. Electronics are considered luxuries and third type necessities. Apple followers are willing to pay thousands for the latest gadget.
  • 10. Is Price Gouging for Apple iPads unethical? (cont.) Price Gouging for Necessities Price gauging for necessities in a state of emergency is considered unethical. It’s unethical when suppliers exploit an imbalance in supply in their favor by selling necessities for new higher prices. Individuals of all social classes are forced to buy necessities for double or triple the price.
  • 12. Cookies Do you like cookies? We have all types of cookies and almost everyone loves them. Check this one for example: The cookie in the picture won’t harm you, but the other kind you can’t find in your oven are the ones that you should really be careful about. They are called: INTERNET COOKIES
  • 13. What are Internet cookies and how are these cookies used in your computer? Cookies are small files downloaded on to your computer whenever you visit a website. They are used by advertisers to track the users personal info and provide them with types of things the user likes whenever he or she visits a website. Next, flashing banners or ads are added to the users website to attract their attention.
  • 14. Why are the Do we have marketing firms any privacy? using cookies? Some websites care about people’s privacy and they will not allow access to people’s personal data. However, as soon as someone In order for marketing firms to sell attempts to keep records or use their products, they have to use tracking devices on other people, cookies to receive information on the privacy rights become an issue. websites visited by a user. After getting this information, they send flashing banners and ads to the user’s most visited websites in order On the other hand, some websites to attract attention to their products. that use cookies can lead advertisers directly to someone’s personal info.
  • 15. How is this helping the marketing firms Morally right or advertisers to or wrong? gain profits? By Knowing someones personal Advertising a product is good, but data, it is easy for an advertiser to tracking someones personal data is send his ads to the website that the morally wrong. Advertisers are person visited most. Once they catch making profits out it by sending their that customers attention, and the flashing banners to the customers customer click their banners, they and some of these banners might be start interacting with the customer by false and contain viruses that help introducing them to their products hackers get personal info. and making offers to buy their products.
  • 16. Pop-up Ads = Annoying?
  • 17. All about Pop Ups First introduced in the mid 90’s. Marketers from all over the world started using this method. They soon became overwhelming and annoying to the consumers. Due to the annoyance, pop-blockers were introduced by internet giants (Yahoo, Google, and Microsoft).
  • 18. What happened to pop-up ads? Was this a proper way to advertise? Pop up ads are still around. Pop-up ads began to have a more However, they are not as annoying as negative impact than it did a positive before. one. Some organizations have stopped Many organizations realized this using them and a lot of software is way of advertising was giving their currently out that stops these ads. brand/company a negative image. Marketers and World Wide Web guru’s have found other ways to advertise through the internet.
  • 19. What is Spam? What types of Spam is there? Spam is the use of electronic While the most widely recognized form of spam is e-mail spam, the term is applied to messaging systems (including most similar abuses in other media: broadcast media, digital delivery systems) to send unsolicited bulk Instant messaging spam Usenet newsgroup spam messages. Web search engine spam, Spam in blogs, Wiki spam Online classified ads spam Mobile phone messaging spam Internet forum spam Junk fax transmissions Social networking spam Television advertising File sharing network spam.
  • 20. Spam Marketing. Why? Spamming remains economically viable because advertisers have no operating costs beyond the management of their mailing lists, and it is difficult to hold senders accountable for their mass mailings. Spammers are numerous, and the volume of unsolicited mail has become very high. In the year 2011, the estimated figure for spam messages is around seven trillion. Lets say I want to send an advertisement to 1,000,000 “targeted” people: -To send by regular bulk mail, it could cost around $200,000 - $300,000 -To send by email, it might only cost $1,000 -i.e: the cost to buy a list of email addresses harvested from web sites, mailing lists, chatrooms, and news groups are a lot cheaper. Then there are Dictionary Attacks: -Try a lot of plausible address combinations -Keeping the ones that don’t bounce back -Puts added strain (bandwidth) on the network
  • 21. Categorical Imperative Categorical Moral Imperative Ethical View -Act guided by moral principles that can at the same time be used as base for a universal code of law -Act so that you always treat both yourself and other people as ends in themselves; never purely as means to an end. Scenario: Suppose I have a great new product that I wish to advertise. I send an unsolicited email to a large group of people knowing that only a tiny fraction is interested. It is not ethical as if everyone sent spam, it would render email useless. Everyone pays for email access and should not have their services rendered useless.
  • 22. Rule Utilitarianism Act Utilitarianism Rule
U'litarian
Evalua'on: Act
U'litarian
Evalua'on:
 ‐We
should
adopt
moral
rules
which,
if
followed
by
everyone,
will
 lead
to
the
greatest
increase
in
overall
happiness. ‐An
ac'on
is
right
(or
wrong)
to
the
extent
that
it
 increases
(or
decreases)
the
total
happiness
of
the

 Scenario:
Products
being
adver3sed,
where
only
a
small
frac3on
of


 affected
par'es.
 









targets
are
known
to
be
interested. Scenario:
 A
product
that
costs
$10
to
make,
is
sold
for$25,
 purchasers
value
at
$30. 








What
if
only
1%
of
all
small
businesses
in
the
US
emailed
you
1 


‐
(i.e:
their
derived
happiness) 
Spam
adver'sement
per
year? There
are
24,000,000
small
businesses
in
America 100
million
bulk
messages
sent
cos'ng
 those
who
receive
it
and
are
not
 interested. 1%
=>
240,000
emails
per
year As
a
result
each
of
those
has
$0.01
of
 unhappiness
('me
wasted). 240,000
/
365
=
657
emails
per
day
for
each
person 10,000
customers
purchase
product
and
get
 full
happiness. ‐Profit
for
business
=
$150,000 So
is
using
Cookies,
Pop‐Ups
or
Spam
ethical
under
Rule
U'litarianism?

 ‐Customer
benefit
=
$300,000
‐
$250,000 ‐No,
because
the
usefulness
of
these
would
be
very
minimal!
 ‐Unhappiness
=
99,990,000
*
$0.01
=
$999,900
  • 24. Basically..... Price gouging occurs when the wake of an emergency causes sellers of a certain necessary good to sharply raise prices beyond a normal specified selling cost. In the United States, there is no anti-gouging legislation (besides during a state of emergency). Although one bill has passed the House of Senate focusing on price gouging gasoline. Some people believe that price gouging is unethical while some economists believe that it can greatly benefit someone in desperate need. To an extent, price gouging can serve moral goals by promoting effective allocation of insufficient resources and reducing shortages during times of emergency, overall creating economic incentives that will lead to increases of supplies to desperate populations. When thinking about price gouging, make sure you decipher the difference between a luxury and a necessity. -We all need water during a hurricane, but are getting super bowl tickets a life or death situation?
  • 25. And..... When it comes to Internet advertising, it is unethical to make false claims and bait- and-switch offers. Cookies, Pop-Ups and Spam all occur without the permission of the receiver and it is not considered an appropriate or moral way to advertise. The Internet Advertising Bureau is trying to develop guidelines for a ethical framework of advertising on the Internet. Using Cookies, Pop-Ups and Spam are unethical ways to advertise under the rule utilitarianism because the usefulness of this Internet marketing is very minimal. When advertising, it’s important to keep the categorical imperative in mind and keep moral principles in mind at all times.
  • 26. QUIZ TIME ! 1. To determine price gouging, the law compares 3. Are Cookies, Pop-ups or Spam ethical under Rule the price of the commodity or service to the Utilitarianism? Why? average price charged over how many days A) Yes, they can be used by anyone, therefore, it is prior to a state of emergency? ethically allowed B) No, they would diminish the usefulness that the A) 7 media used to solicit it B) 15 C) Yes, it allows anyone to make profits upon use C) 30 D) No, they would allow equal happiness by all D) 45 recipients 2. Many economists believe that price gouging can 4. Which forms or means of Internet advertising do benefit: many receivers find inappropriate or even deceitful? A) Suppliers B) Consumers A) All forms of Internet marketing C) People in affected areas B) Pop-ups, Spam, and Cookies D) All of the above C) Email lists you’ve signed up for D) None

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