As the U.S. braces for a likely rise in coronavirus cases this week, experts warn that access to health resources and equipment will play a crucial role. On one hand, authorities are discouraging consumers from engaging in panic-buying. On the other, companies – such as Amazon – are enforcing fair pricing policies to prevent price gouging for the most sought-after items.
Dana Radcliffe, senior lecturer in business ethics at Cornell University SC Johnson College of Business, studies ethical issues in business, politics, and public policy. He says that in times of civil emergency, such as a pandemic, those who jack up prices to maximize profits are exploiting their fellow citizens.
“Often, in a civil emergency such as a hurricane or a pandemic, sellers of urgently-sought products sharply raise the prices, prompting accusations of ‘price-gouging.’ The reason so many people are outraged by such behavior is that they feel the vendors are taking unfair advantage of people in dire need.
“Defenders of such increases claim that the drastically higher prices simply reflect market conditions – the intersection of supply and demand. The problem, however, is that, in emergencies where critical supplies are scarce, the conditions of a ‘free and fair market’ don’t exist – since the buyers don't have options. They cannot simply buy at lower prices from competing suppliers. Rather, the sellers are in the position of monopolists who can demand whatever price they want because their customers have no alternatives. It’s such exploitation of fellow citizens’ vulnerability that makes price-gouging unfair – and, frankly, unpatriotic.”
Elena Belavina, associate professor of applied economics at Cornell University SC Johnson College of Business, studies grocery retail and supply chains. She says that there are three potential effects of Covid-19 on grocery supply chains.
“The effects due to imported grocery items will vary by kind of products. We expect significant constraints on supply of products from affected regions (China, Korea, Japan and parts of Europe). Consumer packaged goods, frozen meat and fish have the most far-flung supply chains and are probably most at risk of disruption. On the other hand, fruit and vegetable supply chains are largely American and mostly span areas that are, so far, less affected by the virus. If the virus is uncontained, over the long run, there might be constraints on farm inputs. But that seems unlikely based on what we have seen in terms of the containment efforts in China.
“So far, there are no U.S. internal transportation restrictions and we don’t expect them. But if things get there, we can expect significant disruption of grocery supplies. Particularly fresh fruit and vegetables supplies to the Northeast, might be severely disrupted.
“At this point, the biggest risks and disruptions will likely come due to consumer hoarding and panic buying. Modern supply chains are lean and efficient, which is great in regular times, but they have surprisingly little slack to deal with panic buying. We have already seen the effects in terms of protective gear, hand sanitizers, etc. There is no reason for anyone to hoard other groceries, but if customers do that, this might end up being the most significant impact of the virus for most consumers. Packaged foods, dry goods, etc., are the most likely items to be affected."
Karan Girotra is a professor at Cornell Tech and in the SC Johnson College of Business. He can comment on the impact that the coronavirus may have on retail businesses, as well as its effect on supply chains of products and groceries being sold in the United States.