Moral Dilemmas:Price Gouging and Internet Advertising
Price Gouging: Is it good forsuppliers or consumers? Or both?
What is Price Gouging?Under the law, evidence of price gouging was explained as follows: the law compares theprice of the commodity or service to the average price charged over the 30 day period priorto the declared state of emergency. If there is a “gross disparity” between the prior priceand the current charge then it is price gouging.Some might believe that price gouging is when suppliers are benefiting from a short-termchange in the demand curve or when prices rise higher than what a consumer wants to payor considers fair or reasonable.Basically, it is an increase in prices that are not justified after a supply or demand shockduring 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.
Can Everyone Beneﬁt? Most suppliers beneﬁt from price gouging but isthere 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 theycan. 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 sonot 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 soldFamilies were in line for overseas for $1,700 - $2,000hours to buy up all of the where the iPad was notunits 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.
CookiesDo you like cookies? We have all types of cookies and almost everyoneloves 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.
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, butdata, it is easy for an advertiser to tracking someones personal data issend his ads to the website that the morally wrong. Advertisers areperson visited most. Once they catch making proﬁts out it by sending theirthat customers attention, and the ﬂashing banners to the customerscustomer click their banners, they and some of these banners might bestart interacting with the customer by false and contain viruses that helpintroducing them to their products hackers get personal info.and making offers to buy theirproducts.
All about Pop UpsFirst introduced in the mid 90’s.Marketers from all over the world started using this method.They soon became overwhelming and annoying to theconsumers.Due to the annoyance, pop-blockers were introduced by internetgiants (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 moreHowever, they are not as annoying as negative impact than it did a positivebefore. one.Some organizations have stopped Many organizations realized thisusing them and a lot of software is way of advertising was giving theircurrently out that stops these ads. brand/company a negative image.Marketers and World Wide Webguru’s have found other ways toadvertise 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 tomessaging systems (including most similar abuses in other media:broadcast media, digital deliverysystems) to send unsolicited bulk Instant messaging spam Usenet newsgroup spammessages. 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 Ulitarian Evaluaon: Act Ulitarian Evaluaon: ‐We should adopt moral rules which, if followed by everyone, will lead to the greatest increase in overall happiness. ‐An acon 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 pares. 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 adversement per year? There are 24,000,000 small businesses in America 100 million bulk messages sent cosng 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 = $150,000So is using Cookies, Pop‐Ups or Spam ethical under Rule Ulitarianism? ‐Customer beneﬁt = $300,000 ‐ $250,000 ‐No, because the usefulness of these would be very minimal! ‐Unhappiness = 99,990,000 * $0.01 = $999,900
Basically.....Price gouging occurs when the wake of an emergency causes sellers of a certain necessary good to sharplyraise prices beyond a normal speciﬁed selling cost.In the United States, there is no anti-gouging legislation (besides during a state of emergency). Although onebill 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 beneﬁtsomeone in desperate need.To an extent, price gouging can serve moral goals by promoting effective allocation of insufﬁcient resourcesand reducing shortages during times of emergency, overall creating economic incentives that will lead toincreases 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 itis not considered an appropriate or moral way to advertise.The Internet Advertising Bureau is trying to develop guidelines for a ethicalframework of advertising on the Internet.Using Cookies, Pop-Ups and Spam are unethical ways to advertise under the ruleutilitarianism because the usefulness of this Internet marketing is very minimal.When advertising, it’s important to keep the categorical imperative in mind andkeep 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 Rulethe 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 isprior to a state of emergency? ethically allowed B) No, they would diminish the usefulness that theA) 7 media used to solicit itB) 15 C) Yes, it allows anyone to make proﬁts upon useC) 30 D) No, they would allow equal happiness by allD) 45 recipients2. Many economists believe that price gouging can 4. Which forms or means of Internet advertising dobeneﬁt: many receivers ﬁnd inappropriate or even deceitful?A) SuppliersB) Consumers A) All forms of Internet marketingC) People in affected areas B) Pop-ups, Spam, and CookiesD) All of the above C) Email lists you’ve signed up for D) None