(all of these fall under the heading of “allow price gouging”. That’s the right answer for production-side incentives. It’s the WRONG answer for speculators …
I’m not sure that’s true. Speculators are an important part of price discovery. The problem is that lots of people hate what they ‘discover’ and thus we generally fail to heed those discoveries.
The general problem seems to be (rapid or extremely rapid) scalability and that seems like just a very hard problem to solve.
Within normal constraints and timeframes, this is absolutely true—speculators are performing an important role in predicting and propagating demand. For short-term events which are ALREADY visible to suppliers (and somewhat less so to consumers) speculation has less information value, and more disruptive impact by their normal-value of shifting demand forward. In these situations, they shift a temporary demand into a much higher peak than it otherwise would be.
In other words, speculators are valuable usually, because usually they’re flattening the curve. They’re harmful in some exceptional circumstances because they cause the spike to be artificially higher than it otherwise would be.
Note that it’s NEVER this black and white. It’s certainly true that there are both benefits and harms to different constituencies in all cases, and where you net out will depend on what you’re focusing on.
I’m not sure that’s true. Speculators are an important part of price discovery. The problem is that lots of people hate what they ‘discover’ and thus we generally fail to heed those discoveries.
The general problem seems to be (rapid or extremely rapid) scalability and that seems like just a very hard problem to solve.
Within normal constraints and timeframes, this is absolutely true—speculators are performing an important role in predicting and propagating demand. For short-term events which are ALREADY visible to suppliers (and somewhat less so to consumers) speculation has less information value, and more disruptive impact by their normal-value of shifting demand forward. In these situations, they shift a temporary demand into a much higher peak than it otherwise would be.
In other words, speculators are valuable usually, because usually they’re flattening the curve. They’re harmful in some exceptional circumstances because they cause the spike to be artificially higher than it otherwise would be.
Note that it’s NEVER this black and white. It’s certainly true that there are both benefits and harms to different constituencies in all cases, and where you net out will depend on what you’re focusing on.
That’s a fantastic point and one that Alex Tabbarok made in this post recently – ‘ticket scalping’ basically.