Price gouging is a pejorative term for a seller pricing much higher than is considered reasonable or fair. In precise, legal usage, it is the name of a felony that applies in some of the United States only during civil emergencies. In less precise usage, it can refer either to prices obtained by practices inconsistent with a competitive free market, or to windfall profits. Non-pejorative uses are generally in reaction to what the writer believes is an unjustified restraint on the market.
Economic theory suggests that, even in unusual circumstances, price ceilings prevent incentives for the supply of goods. For example, in a disaster situation, a very high price for equipment (e.g. tents) will prompt hugely increased supply of the relevant goods. Libertarians are among those who think firms should be allowed to charge what they want regardless of the circumstances.
As a criminal offense, Florida's law is reasonably typical. Price gouging may be charged when a supplier of essential goods or services sharply raises the prices asked in anticipation of or during a civil emergency, or when it cancels or dishonors contracts in order to take advantage of an increase in prices related to such an emergency. The model case is a retailer who increases the price of existing stocks of milk and bread when a hurricane is imminent. It is a defense to show that the price increase mostly reflects increased costs, such as running an emergency generator, or hazard pay for workers.
The term is similar to profiteering but can be distinguished by being short-term and localized, and by a restriction to essentials such as food, clothing, shelter, medicine and equipment needed to preserve life, limb and property. In jurisdictions where there is no such crime, the term may still be used to pressure firms to refrain from such behavior.
Some support the ability to raise prices under such circumstances, asserting that government prohibition of the practice is a...