Wednesday, May 27, 2009

On Gouging

With the addition of several new associates, we now have a whole new region as our playground. Fortunately for me, some of the former owners of said region have started to gouge the market.

But the uncomfortable truth is that gouging is basically a one-entity cartel and thus can only work when all providers collude to keep the prices high. Any small, agile actor such as myself will be able to throw a spanner into the works by providing adequately-priced goods. In that situation, there are only three possible outcomes. First, the gouger could choose to ignore me and let me seize the market share while he gets stuck with unsold goods. Secondly, he could buy my goods and relist them at his price. This only gives me an additional incentive to bring in more goods, because his actions alone keep the demand up. I get my profit every time and can reinvest it into the market. And finally, he could abandon his price-gouging scheme and engage me in healthy competition. In any case, my associates get access to reasonably-priced goods.