Managers and the Legal Environment 7th Edition by David Madsen, Constance Bagley

Exercise 4

During Hurricane Irene in 2011, many people anticipated flooding and widespread power outages. Hotel Le Bleu in Brooklyn, New York, which typically offers rooms for $250 per night, raised its prices to $999 per night during the storm, knowing that people would pay the price rather than go to a shelter. Those who planned on staying in their homes even if they lost power rushed to hardware stores to buy batteries and generators. As a hotel operator or hardware store owner, you know that you can expect a significant increase in business during times of impending natural disasters. Do you raise prices? Even if you raise prices, you expect that you will still run out of merchandise as people stockpile goods in preparation for the disaster. As a result, those who may need the merchandise the most may not be able to purchase it. Should you monitor the needs of your customers and sell to only those customers most in need? Would raising your prices serve the same purpose (i.e., at higher prices, people are more likely to buy an item only if they really need it)? Would your answer vary depending on the socioeconomic composition of your customer base? [Based on Chris MacDonald, Post-Hurricane-Irene Business Ethics Roundup , Canadian Bus., Aug. 29, 2011, available at http://www.canadianbusiness.com/blog/ business_ethics/42445--post-hurricane-irene-businessethics-roundup (last visited Aug. 29, 2011).]