Michael Giberson
If you follow price gouging headlines, you become accustomed to seeing price gouging stories around big sports events: the Rugby World Cup, NASCAR races, NCAA basketball finals, and always the Olympics (a selection: Barcelona 1992, Atlanta 1996, Sydney 2000, Salt Lake City 2002, Athens 2004, Vancouver 2010, London 2012, and finally this extreme example).
All of which serves as context to reports of Super Bowl price gouging.
Super Bowls usually produce price gouging complaints. But, as a story about today’s Super Bowl reports, rates in Indianapolis may have a particularly strong mark-up because of the relatively small host city. “This is what happens when the NFL books the nation’s largest sporting event in a city with only 6,000 hotel rooms. … By population, Indianapolis is the smallest Super Bowl city since Jacksonville, Fla., which hosted a disastrous game in 2005.”
Rooms are not in perfectly inelastic supply, non-traditional spaces from spare bedrooms to whole houses are being rented out for the week. Nonetheless, supply is relatively inelastic, and it is only the relatively high prices visitors are willing to pay that brings many of these spaces into the market. A surge in demand and relatively inelastic supply: elementary economics predicts a substantial increase in price.
Host city officials, league officials, and fans often lament price gouging, but it is easy enough to predict the effect of any law or custom that prevented it: more people renting rooms one, two, or more hours away, fewer people at game weekend events and pre-game events, and more people stuck in worse traffic before and after the game. (Or, perhaps in a language more relevant to host city officials, an effective anti-price gouging campaign would mean a smaller bump tax in local tax receipts from folks attending the game.)
The fundamental issue is the relative scarcity of rooms during the game weekend, and the question is how to match fans and rooms. Letting prices work earns price gouging complaints, but failing to let prices work would surely create worse problems.