Is there a way to do this if you’re not already a manufacturer? With, say, N95 masks—could we buy up a bunch of regular ones when there’s no shortage, do something that costs a little money and adds a tiny bit of value (maybe print cute pictures on them for doctors who wear them around little kids) and then mark them up 900%? I mean, I don’t have money to buy them with, but if stockpiling really makes economic sense then I’d think we could get investors to front it.
How do price gouging laws apply to discounted products? If we almost always offer an 80% discount, can we stop offering that during an emergency?
ETA: to be clear, masks are just an example. They would not be a good choice in the future because after this pandemic governments will actually stockpile them. We’d need to figure out what there’s likely to be a major shortage of in the NEXT global emergency.
Sure, it’s common for a reseller to bundle support, installation services, or warranty with items, in order to justify very large markups. The discount methods work too. A packaging or product change is closer to the manufacturer case—you have to deal with time/cost/capital tradeoffs to change your production rate or inventory size.
As a pure speculator, you’re starting off in a worse spot, because you’re dependent on the manufacturer(s) for supply, and you’ll start with slimmer profit margins, which makes your risk much higher if the shortage doesn’t occur as severely as you expected, or if manufacturers can ramp up faster than you predicted.
You’re also in a morally worse spot—you run the risk that you are creating or amplifying the shortage, not just predicting and smoothing the consumption of rapidly-value-changing products, and not actually increasing supply with the increasing price. If you aren’t solving the problem given in the post (you could make more, but not at your normal prices), you’re not as clearly on the side of good.
Keep in mind that simple models are pretty misleading. There are almost NO manufacturers who aren’t also middlemen for parts of their equipment. They don’t dig up and smelt their own ore, they buy everything (often significant manufactured subcomponents) from other manufacturers. There are few distributors who aren’t adding real value with some amount of warranty/returnability, and delivery or quantity options that the manufacturer doesn’t support. These things really blur the line between producer and middleman.
You’re also in a morally worse spot—you run the risk that you are creating or amplifying the shortage, not just predicting and smoothing the consumption of rapidly-value-changing products. If you aren’t solving the problem given in the post (you could make more, but not at your normal prices), you’re not as clearly on the side of good.
I don’t follow. The idea would be that you aren’t contributing to the normal supply, you just stockpile in case of future emergency. This increases production during normal times slightly, and then when there is a pandemic you would stop purchasing and start selling. This reduces the need for manufacturers to produce more at higher marginal cost. How could it create or amplify a shortage?
It’s true you’d have no profit prior to the emergency (and large costs) but in theory that shouldn’t matter as long as your investors diversify.
Stockpiling over time, long in advance of a crisis is great (but might be tough to find those investors). Supply has time to adjust and you are not hurting anyone.
Stockpiling in a burst just before a rush, when it’s too late for suppliers to adjust production, is much less clear. You’re accelerating or in some cases creating the shortage, and you’re not changing the short-term supply at all.
Ah, okay. I guess that answers my question: you don’t think it’s possible to mitigate shortages by stockpiling without losing money in expectation. I wish it were—surge production is a much more tenuous solution that depends on being able to foresee a disaster shortly before it occurs, and even then it might not be possible to produce enough to help significantly.
Is there a way to do this if you’re not already a manufacturer? With, say, N95 masks—could we buy up a bunch of regular ones when there’s no shortage, do something that costs a little money and adds a tiny bit of value (maybe print cute pictures on them for doctors who wear them around little kids) and then mark them up 900%? I mean, I don’t have money to buy them with, but if stockpiling really makes economic sense then I’d think we could get investors to front it.
How do price gouging laws apply to discounted products? If we almost always offer an 80% discount, can we stop offering that during an emergency?
ETA: to be clear, masks are just an example. They would not be a good choice in the future because after this pandemic governments will actually stockpile them. We’d need to figure out what there’s likely to be a major shortage of in the NEXT global emergency.
Sure, it’s common for a reseller to bundle support, installation services, or warranty with items, in order to justify very large markups. The discount methods work too. A packaging or product change is closer to the manufacturer case—you have to deal with time/cost/capital tradeoffs to change your production rate or inventory size.
As a pure speculator, you’re starting off in a worse spot, because you’re dependent on the manufacturer(s) for supply, and you’ll start with slimmer profit margins, which makes your risk much higher if the shortage doesn’t occur as severely as you expected, or if manufacturers can ramp up faster than you predicted.
You’re also in a morally worse spot—you run the risk that you are creating or amplifying the shortage, not just predicting and smoothing the consumption of rapidly-value-changing products, and not actually increasing supply with the increasing price. If you aren’t solving the problem given in the post (you could make more, but not at your normal prices), you’re not as clearly on the side of good.
Keep in mind that simple models are pretty misleading. There are almost NO manufacturers who aren’t also middlemen for parts of their equipment. They don’t dig up and smelt their own ore, they buy everything (often significant manufactured subcomponents) from other manufacturers. There are few distributors who aren’t adding real value with some amount of warranty/returnability, and delivery or quantity options that the manufacturer doesn’t support. These things really blur the line between producer and middleman.
I don’t follow. The idea would be that you aren’t contributing to the normal supply, you just stockpile in case of future emergency. This increases production during normal times slightly, and then when there is a pandemic you would stop purchasing and start selling. This reduces the need for manufacturers to produce more at higher marginal cost. How could it create or amplify a shortage?
It’s true you’d have no profit prior to the emergency (and large costs) but in theory that shouldn’t matter as long as your investors diversify.
Stockpiling over time, long in advance of a crisis is great (but might be tough to find those investors).
Supply has time to adjust and you are not hurting anyone.
Stockpiling in a burst just before a rush, when it’s too late for suppliers to adjust production, is much less clear. You’re accelerating or in some cases creating the shortage, and you’re not changing the short-term supply at all.
Ah, okay. I guess that answers my question: you don’t think it’s possible to mitigate shortages by stockpiling without losing money in expectation. I wish it were—surge production is a much more tenuous solution that depends on being able to foresee a disaster shortly before it occurs, and even then it might not be possible to produce enough to help significantly.