Stock You Like a Hurricane - When Price Gouging Won’t Fly under Severe Weather Conditions

In the wake of the devastation caused by Hurricane Harvey, many on the East Coast are watching closely to see where another powerful hurricane, Irma, will make landfall in the continental United States. These back-to-back catastrophes have created a unique situation in which many items considered necessities for surviving during and after such a storm are in short supply. In fact, in the wake of the devastation left by Harvey in the Houston area, many trucks in the southeast are being loaded up with water, diapers, food, and other items to help in the relief effort in Texas, further straining the supply of essential goods to the area that is about to be hit next. While shortages of essential goods have developed in many areas, there has been no shortage of articles written by economists describing how laws prohibiting price gouging lead to or exacerbate many of these shortages. For informational purposes, I’ll describe why this is in the following paragraph. What is even more interesting, is when we find examples of other economic forces at work that are largely being ignored in the other articles. In particular, this week several airlines announced that they would be doing quite the opposite of price gouging, by voluntarily capping the prices they are charging on flights to and from Florida during the evacuation effort.

Hurricane Irma Threatens Florida as People in its Path Prepare
(Photo credit: NASA/NOAA GOES Project)

Before we discuss the scenario with voluntarily capping airline flight prices, let’s first briefly examine the reason economists are so interested in price gouging laws to begin with. The reason most economists will argue against price controls of this sort that limit the maximum price that can be charged for a good, is that it prohibits the market from working to set the price that “clears the market” in a competitive equilibrium. That is to say, sometimes the price of a good needs to be very high before quantity supplied equals quantity demanded. If the price is below this point, people will want to buy more of the good (because people find it to be relatively pretty cheap) than is supplied (because many suppliers don’t find it profitable to sell a good for so few dollars). This inevitably leads to a shortage, and determining who gets the limited available quantity must be done in some other way than raising the price. One method of distributing goods in such a scenario is “queueing”, which is distributing the resource to whomever shows up first in line. If you’re worried about one person buying a lot of the good (stocking up on many cases of bottled water), instead of many people buying one case each, you could also try imposing limits on how many each person could purchase.

If you do limit the ability of prices to rise through anti-price gouging laws, most economist argue, you create two problems. The first is that people may overindulge in the artificially cheap good (stocking up on as much bottled water as possible), leaving very little or none for others (who may value it more) to purchase. The second problem is that the price gouging laws remove or decrease the incentive for entrepreneurs to transport much needed supplies to the affected areas from areas where they are more plentiful. Absent these laws, someone from Virginia may be tempted to purchase several generators and drive to Houston or Florida to sell them to people who are in great need of them, albeit at a higher price to cover their investment/expenditures.

Price Gouging Laws lead to Shortages of Many Essential Goods
(Photo credit: By Maksym Kozlenko via Wikimedia Commons)

What I want to discuss in this article, however, is not the typical price gouging scenario. Earlier this week, as predictions of Irma’s landfall somewhere on the Florida peninsula became increasingly more certain, evacuations began to take place. Then, something interesting happened. Airlines began advertising that they were doing two things. First, they were attempting to add as many extra flights as possible to get people out of Florida. Second, and somewhat surprisingly to many economists, most airlines announced that they were voluntarily capping the prices of their Florida flights at relatively low levels. While this may seem like an odd phenomenon to many, I would argue that the unique circumstances of these flights make the voluntary price capping a unique exception, and unlike other necessities like plywood, bottled water, and gasoline.

First, despite economists’ general agreement that prices should be able to rise (for the reasons discussed above), the general public tends to view large hikes in prices negatively. Thus, you may not expect many companies to raise prices by much during disasters, even if there is no law prohibiting it, due to the potential decrease in customer satisfaction. This doesn’t apply much to the entrepreneur who chooses to drive to an area to sell more generators, but it can be pretty damaging for larger companies whose reputation is on the line. Airlines have received a lot of negative P.R. already this year, and probably aren’t looking to add to it, even if they’re otherwise justified in their actions.

Second, while airlines are increasing the number of flights (and size of planes) to transport more people, there’s actually little room to temporarily increase the supply of seats flying out of Florida. One large barrier to increasing supply is the limited capacity of airports to have more planes at their gates. This means that even if the airlines charged several thousand dollars per seat, there just aren’t enough flights for it to have much of an impact on profits. When the airlines weighed the lop-sided risk of the costs of a potential P.R. disaster with a small bump in profits versus making a positive impression on the public and forgoing those profits, the choice is pretty obvious. When viewed in this light, it’s easy to see why airlines would publicly impose price restrictions on themselves.

Larger Planes and More Flights are Being Added to Help with Florida Evacuation
(Photo credit: Carla Thomas  via NASA)

The problems associated with price gouging laws are clear when applied to goods like plywood or generators, but don’t fit as well when applied to flights. It is much more plausible that someone would be incentivized to drive a truck full of supplies to Florida than to fly their small plane down, find a runway with available space, and find customers to fly out of harm’s way a few at a time. The limited ability to expand “production” of flights, coupled with the fact that a few large companies with a lot to lose control most flights, means that in this instance there’s no need for a price gouging law to limit prices. The major airlines have made a competitive and economic decision that, at least for them, price gouging just won’t fly.

Total Eclipse of Supply - Why are Solar Eclipse Glasses Impossible to Find?

America is gearing up for its first total solar eclipse in well over a quarter century, and there’s something strange going on near the path of totality. No, I’m not talking about the possibility of Lizard Man sightings during the eclipse, but rather the fact that there appears to be a shortage of the cheap disposable solar eclipse viewing glasses that are essential to wear if you want to look at the sun without permanently damaging your eyes. This article, from Denver, describes the difficulty that people from Oregon to South Carolina are experiencing in finding the glasses in the waning hours before Monday’s eclipse. I’ve discussed shortages before on this blog, so why is this one so strange/unexpected?

A total eclipse over the United States is a once-in-a-generation phenomenon
(Photo credit: NASA  via Wikimedia Commons)

The shortage of solar eclipse glasses is interesting because it should qualify as a relatively competitive market (many buyers and sellers; free entry/exit; etc…), and the product is relatively inexpensive and quick to manufacture and distribute. In addition, science allows us to predict future eclipses far into the foreseeable future, so it’s not like this event suddenly snuck up on everyone. Thus, despite there being no specific laws placing a price ceiling on solar eclipse viewing glasses (some states’ general price gouging laws could potentially apply, but I’m not aware of any being applied at this time), a shortage of eclipse viewing glasses has emerged. So, you may be asking yourself, what kind of factors would contribute to such an economic anomaly?

When a competitive market experiences a shortage, it usually adjusts for the disequilibrium created (quantity demanded > quantity supplied) by increasing prices until the market reaches equilibrium. This occurs because, as prices rise, more suppliers are willing to produce more eclipse glasses, and at the same time some consumers stop demanding pairs of glasses because the price gets too high for them. We expect this to take a bit of time to occur, but even if there were no additional time to produce more pairs of glasses the price of glasses should increase a lot until enough consumers drop out and there is no longer a shortage.

The path of "totality" stretches from coast to coast!

(Photo credit: Wikimedia Commons)

There are two interesting things that appear to be occurring with eclipse glasses. First, it appears that both producers and consumers may have underestimated the Demand for these glasses. This is likely do in large part to the rarity of total solar eclipses in the United States. It’s hard to predict the level of Demand without much historical data, especially due to the lack of eclipses that could be hyped up by so many internet and 24/7 news stories. When stores that don’t typically sell eclipse glasses (hardware stores, gas stations, etc…) were deciding how many pairs of glasses to order to stock their shelves, they seem to have preferred erring on the side of underestimating Demand. This makes sense; while eclipse glasses are relatively cheap to produce and store, their value drops to almost nothing after the eclipse on 08/21/2017. The next total solar eclipse in the US is not until 2024, and only overlaps with this year’s path around southern Illinois/southeast Missouri. That leaves a lot of stores across the nation that would have to store any excess glasses with very few potential buyers after Monday.

The second complication, that may be the most interesting to an economist, is that many groups began advertising several weeks before the event that they would be handing out eclipse glasses for free. Some were schools, museums, and other government institutions who may have been seeking to promote the “public good” by helping protect people’s eyes while encouraging people to pay attention to this scientific phenomenon. Others were retail establishments, including many optometrists, who used the free glasses as a form of advertising and a way to get potential customers in their doors. No matter their reasons, these free glasses seemed to have two effects. First, many suppliers knew they’d be trying to sell glasses against others who were giving them away for free, and so they logically ordered fewer than they otherwise would have. Second, many consumers (like me) heard that there were free glasses available, and chose to pass by those that were for sale in the store a few weeks before the eclipse.

Were you able to snag a pair of these stylish and necessary frames?

(Photo credit: nps.gov)

By the time everyone realized that Demand was much higher than expected, it appears to have been too late. No longer being able to find free glasses around town, consumers turned to the stores selling the glasses. Prices appear to have been a bit “sticky”, with the high Demand not being fully revealed to the stores selling the glasses until they had almost sold out. If they had raised their prices immediately only to find that Demand was low, consumers would have only bought from their competitors, and they would have been left with a large excess of glasses with no buyers.

One additional complication in this ordeal was the emergence of “fake” solar glasses sold on Amazon and elsewhere. Many people purchased glasses for themselves and their families only to be told that they may not be fully protected from the solar rays after all, and that they would need to find the “approved” version of the glasses. Whole counties even ordered and distributed these unapproved glasses! As any given person only needs one pair of approved glasses to view the eclipse, many people who would have otherwise been satisfied and not purchased more glasses at any (positive) price were now thrust back into the market to try to buy a pair of glasses in time.

We typically expect a market to self-equilibrate over time, unless some sort of barrier (such as a price control) keeps it from doing so. With the Great Eclipse of 2017, we can see that a confluence of unique circumstances has created a shortage of eclipse glasses that it appears will persist through the end of the phenomenon. With a little economic insight, we can “shed some light” on this mystery, just in time for Monday’s darkness.

Credit for Trying - Is Banning Transactions Fees a Win for the Consumer?

Take a second and think back to the last time you bought something that was on sale. How great did it feel? It’s easy to recognize and appreciate deals when you get a better price for something you were going to buy anyway. But how do you feel when the tables are turned, and you’re charged extra to buy something?

For example, when you go to the gas station to fill up your SUV, do you pay with cash or credit? At most stations, the price that you pay per gallon when using cash is different than the price per gallon for using credit. Either way, you’re getting the exact same gasoline, so how do you perceive this difference in price? If you see it as a mark-up or extra fee for using credit, you’re probably not a huge fan of the price differential. On the other hand, if you see it as a discount for using cash, you may view it favorably, and would be unlikely to want to see the discount removed.

When you purchase something, you often weigh 
the cost and benefits of using cash vs. credit

(Photo credit: 401kcalculator.org)

It is with this in mind that this article from The Telegraph, across the pond in the UK, caught my eye. The article was written by The Telegraph’s Consumer Affairs Editor, who chalks up a new law banning charging many credit card fees as a clear victory for consumers. If the title of the article, “[e]nd to rip-off credit card fees…” doesn’t make this position clear, the description of these “rip off” fees as being “used by shops, restaurants and travel firms to make extra profit at the direct expense of customers choosing to pay by card” should remove all doubt. But is the removal of these fees truly a clear “win” for consumers, at the expense of the greedy shops, restaurants, and travel firms?

Let’s begin by considering a portion of the quote above. These fees are charged to customers who are “choosing to pay by card.” This implies that the customers have other options (usually cash), but find paying by card to be preferable for some reason. Presumably, either they find using credit more convenient, or they may receive some cash back or points for using their credit cards. No matter the reason, some citizens chose to pay in credit despite the fee, and others chose to avoid the fee by paying in cash. Essentially, you’re free to sort into the group (cash or credit) that you feel is the best deal for you, after taking the fees into account.

Now what happens if you ban the ability to charge credit card transaction fees? If you’re a consumer, perhaps you’re hoping that the cash price will stay the same, and the credit price will be lowered to match it. Those who previously paid in credit would now be better off, since they still get the perks (convenience, points, etc…) of using credit, but for a lower price. If this scenario were to play out, even those previously using cash would be as well off, if not better off. Some of them may even choose to switch over and begin using credit cards for their purchases! Consumers would clearly be better off, and the costs would fall on either credit card companies or those greedy shops, restaurants and travel firms. The problem is, this scenario has some assumptions that aren’t likely to play out in the real world.

How do you view the price difference in
paying for gas with cash vs. credit?

(Photo credit: 127driver via Wikimedia Commons)

The issue with the scenario above is that it assumes the cash price will stay constant. It’s like assuming that if gasoline is currently $2.00/gallon when using cash, and $2.10/gal when using credit, that all gas would be $2.00/gal after the fees were banned. But it’s costly for gas stations and other stores to offer the payment option for credit cards. They even have to pay fees to the credit card companies for facilitating these transactions. If gas stations can’t pass along these fees to consumers, they have to find some other way to not lose money on the transaction. In this example, gas stations will do one of two things. First, they may increase the price of gas for everyone, let’s say to $2.05/gallon. While those consumers using credit cards are now better off, those who still use cash are clearly worse off, as they are helping subsidize the purchases of their credit using neighbors. The other possible result of the ban on fees is that vendors may choose to cease offering credit cards as a payment option all together. In this case, those who previously used credit cards are clearly worse off, as they used to have to choice to use either cash or credit and chose credit, but now must choose their second best option.

The lessons in the example above could easily be extrapolated to apply to all sorts of shops and firms. It’s easy to see that a law which essentially limits the choices of the consumer is not necessarily a clear “win” for all consumers, or even the average consumer. Viewing the issue as a discount for using cash rather than a penalty for using credit allows us to see more clearly the true costs and benefits of such a regulation. Perhaps The Telegraph is giving lawmakers more credit than they deserve.

Who Watches the Watchmen? Rick Perry, CBS, and Basic Economics

Life would be pretty boring if we were only allowed to form opinions on and discuss matters that we had studied extensively. Often times, part of learning about a subject entails making somewhat shaky declarations on how you think something works, and then having others with more knowledge explain through gentle nudges how and why you weren’t quite right. However, it takes a fair amount of confidence to not only make a statement on a subject you’re only tangentially familiar with, but to try to actually explain the concept to others. It takes even more confidence to be willing to publicly correct whoever made the statement, calling him or her out on the misinformed opinions that were presented. All of that being said, a large part of why I created stealtheconomics.com was specifically to point out misinformation in the news, as it pertains to economics. So while it’s difficult to try to correct someone’s claims, I usually won’t fault someone for trying. This past week presented a glaring exception.

Last Thursday, the internet was abuzz with pretty much everyone who has ever taken an introductory economics course (and as you’ll see, maybe some who haven’t) calling out Secretary of Energy Rick Perry for an incorrect explanation of economics principles that he delivered while visiting a coal plant in West Virginia. The quote in question was in Secretary Perry’s misapplication of a fundamental building block of economics; Supply and Demand.

(Photo credit: Gage Skidmore on Flickr)

According to reports, Perry stated “Here’s a little economics lesson: supply and demand. You put the supply out there and the demand will follow.” This statement does not agree with traditional economic theory. It implies that anything that is supplied in larger quantities will invoke larger quantities being demanded. If this were true, you would find that when your business was having trouble finding buyers for your huge warehouse of fidget spinners, and sales had stagnated, you should just produce many more fidget spinners to solve the problem.

(Photo credit: Pexels)

When I first became aware of this statement, I wondered if it had flown under the radar enough to be featured in a story of its own on this blog. Fortunately, when you’re in a high profile position like the Secretary of Energy, many people appear to be watching to point out when you don’t get your ‘little economics lesson’ quite right.

(Photo credit: Wikimedia Commons)

One such outlet that was quick to jump on the story was CBS News. The site featured this article, which correctly pointed out that Perry’s explanation of the concept of Supply and Demand was pretty far off. The author of the article, unfortunately, did not stop there. The journalist went on not only to point out that Perry’s explanation of this economic concept was incorrect, but to try to explain this concept in her own way, as follows:

“The gist of the theory is, if the supply for a product is low but its demand is high, the product’s price is likely to increase. If a product’s supply is high and the demand for a product is low, however, the product’s price is likely to drop.”

While attempting to point out one person’s blunder, the journalist makes a mistake of her own. The problem is, the price for a product is determined (in general) by the equilibrium reached at the point where Supply and Demand intersect. At this price, the Quantity Supplied = Quantity Demanded, and the “market clears”. It would be correct to say that a product with relatively high demand or relatively low supply would have a relatively higher equilibrium price, and vice versa. However, the only way to get a change in price (to have the price “increase” or “decrease”) would be to observe a shift in Supply, Demand, or Both.  Thus, if a product’s supply is high and the demand for a product is low, the product is likely to have a relatively low price, but the price wouldn’t be expected to “drop”, as Supply and Demand aren’t changing.

It’s important to call out blatant misinterpretations of bedrock economic principles. However, as we learned this week, if you’re going to go further by trying to explain the concept for yourself, it helps to be sure you got it right.

No 'Free Parking' in Real-Life Monopoly?

It’s a tradition as old as consumerism itself. You’ve mastered the art of procrastination, and it’s now Christmas Eve and you have yet to finish buying presents for your loved ones. Unless you’re lucky enough to live in a city where Amazon offers same day shipping, you’re going to have to venture out into the cold to shop at an actual store. But everyone knows you don’t venture out to just any store for Christmas presents, you head to your local shopping mall! The problem is, everyone else has the same plan, and you find yourself circling the parking lot for hours, looking for a place to leave your car before the stores close or sell out of Tickle-Me-Elmos.

Wouldn’t it be great if there were a way to deter others from using up all of these parking spots that you find so valuable? Well one mall in Colorado is attempting to do just that. According to this article from an NBC News affiliate in Colorado, the Cherry Creek Mall in Denver has decided to begin charging for parking in its surrounding lots and garages. In terms of economics, we can speculate on why this change was made (and whether it’s a good or bad idea) from a couple of different perspectives.

It’s possible that the mall is charging for parking spots specifically to improve the use experience on days like the one described above, where the fixed quantity of parking spots available is exceeded by the number of shoppers looking for them. The mall may consider that happier shoppers who are willing to pay a bit to park may also be the types of shoppers who will spend more in the stores inside.

The mall is more likely to be making its decision using a profit-maximization framework. Clearly, assuming some people continue to choose to park at the mall for more than an hour (the first 60 minutes will be free), the mall will be bringing in more revenue from parking than when parking was free. The first question, however, is how many customers will be turned away by the new up-front fixed cost of shopping at the mall, and how this will impact the sales of the mall’s tenants? The mall is hoping to gain more from charging people to park than it will lose through a decrease in the prices it is able to obtain from charging stores to lease spots within the mall. These factors are influenced both by the elasticity of demand for parking, as well as the elasticity of demand for tenant space in the mall itself.

The elasticity of demand for parking is a measure of how many fewer people will park at the mall, if the price of parking increases. It is largely dependent on how many substitutes people can find for parking at the mall. These could take a variety of forms. If people are mainly parking at the mall now to shop at the mall’s stores, then substitutes could include parking elsewhere and walking or riding over to the mall to shop, parking and shopping at other malls or shopping centers, or even staying home and shopping online. There may also be people, however, who use the mall’s parking facilities as a free way to store their car close to downtown Denver, and then travel into town via public transportation or carpooling. These people may choose to instead park closer to downtown, or to find a lot farther out which is less expensive. It will depend on the cost of other parking and transportation options available to them.

It is clear from the mall’s ability to increase prices that it is not in a perfectly competitive market for parking in the area. This is because, while the potential substitutes above exist, many consumers will find spots close to mall (especially garage spots) to be more valuable/higher quality than spots in nearby areas. With this limited monopoly power, standard analysis will show that raising prices and restricting quantity can maximize profits for the monopoly, although it would likely decrease overall welfare, as those previously parking at the mall for free who now don’t park there at all lose Consumer Surplus in the amount of what they would have been willing to pay to park in the mall lot (more than $0 but less than the new price).

So did the mall make the best choice for how to handle its parking situation? This largely depends on what its other options were. Another solution that may have been considered, and may limit the backlash from the public to some extent, would be to have stores validate parking if a purchase is made. This would allow the mall to more directly target the two different groups of people who are looking for parking spots; shoppers and commuters. If the mall is able to raise the price of parking for commuters, but keep the parking free (through reimbursement) to shoppers, it can improve upon any issues with congestion and a shortage or spots without giving up too much revenue from its store tenants. So if you live in the Denver area, keep in mind that while the new parking fees may be irritating now, they could save you a huge headache when you’re already back at home with family and friends on Christmas Eve, instead of sitting in a snowy parking lot for looking for a spot.

Home Prices in San Francisco… Decreasing???

In April, 2016, Business Insider published this article which had a headline that was sure to garner some attention from anyone who knows anything about the high cost of living in San Francisco. The article itself is a fairly incomprehensible amalgamation of quotes and data points, so I wanted to take some time to try to unravel its economic points here.

The main thrust of the article seizes on the observation that “house prices fell 1.8% year-on-year in March, the first such drop in four years.” The first takeaway from this is that it may be an indicator that the extremely hot San Francisco housing market is cooling down. To investigate whether this is the case, you should probably be asking yourself, what economic reasoning would produce this result. A decrease in prices could be the result of a decrease in Demand, an increase in Supply, or some combination of the two. I’ll examine the likelihood of either of these scenarios based on the information provided in the article, and then entertain a few other possibilities which should be explored.

A decrease in demand (whether due to people exiting the San Francisco housing market, a change in taste for San Francisco housing, or some other undisclosed reason) would, ceteris paribus, result in a lower quantity of housing demanded as well as a lower equilibrium price for the average unit.

This is a possible cause, and receives support from the quote in the article where the Chief Economist for Redfin talks about the reduction in listings which were subject to a bidding war. However, the article then immediately switches gears by implying that San Francisco has an “undersupply of housing coupled with a healthy demand.” If this is truly the case, then that “healthy demand” would be maintaining or even increasing the level of demand, leading to the opposite result in terms of price and quantity changes.

If Demand isn’t the main cause of lower prices, then surely it must be due to a change in Supply. More specifically, lower prices would be caused by an increase in Supply, which would also lead to an increase in quantity supplied.

Whether we consider this increase in supply to be newly built homes, or simply an increase in the number of homeowners who are considered in the market to potentially sell their homes, an increase in Supply would contribute to lower home prices. However, the article once again contradicts itself, noting that “there simply aren’t enough homes for sale…” and “many sellers are sitting this year out.” The quotes would suggest, if anything, a decrease in Supply, which would actually result in higher equilibrium prices.

So if we can’t be sure whether year-over-year decrease in housing prices is attributable to a change in Demand or Supply, how should we proceed? One option is to consider whether the market is truly in a long-run equilibrium state. It may be that the market is still adjusting to find the correct price for these homes, and therefore does not meet the assumptions used above. Another thing to note is that the data-point used to generate the article in question is simply that -- one data-point. In order to determine whether market forces are contributing to a true and sustained decline in home prices in this area one would want to examine many more data points and possibilities. Long-run trends in home prices and other contributory factors should be examined, to determine whether a slight decreases in one month compared to that same month one year before are truly indicative of a changing market. For instance, it could be that the homes that happened to be sold the previous year were larger and/or higher quality than those sold this year, which would lead to a lower average sales price, even if overall prices were still increasing. All in all, I’m not as confident as the author of the article is to conclude that “[h]omebuyers are so fed up with San Francisco’s crazy housing market that prices are now falling.”

Rent Hike in Wyoming – A Study in Market Forces

I came across an article recently about a large forthcoming increase in the cost of rent in Jackson Hole, Wyoming. The article, “Rent hike has tenants reeling,” was published in the Jackson Hole News & Guide. It details a clear and devastating plan by the landlords of the 294-unit apartment complex to raise rents by more than 40% in the coming months, and is accompanied by worried quotes from current residents who feel they cannot afford such steep increases when their leases are set to renew. The article’s main focus revolves around two issues which local residents are having a hard time stomaching. The first is the rise in rents. The second is that “the drastic rent increase at Blair Place comes in the midst of an exceptionally tight housing market. Available rentals have all but dried up, while costs for construction have skyrocketed.” Surely, the article suggests, the landlords must realize that the lack of available housing is enough for local residents to handle, without piling on higher rents. This main premise, however, fails to consider some simple economic principles at work.

To understand why higher rents may be exactly what are needed in the Jackson Hole area, let’s imagine some Supply and Demand Curves:

 We can see that the graph includes a standard downward-sloping Demand curve, indicating that more rental units are demanded the lower the price per rental unit gets. However, with the Supply curve, we have a typical upward slope until 183 units (the number of 2-bedroom units available in the apartment complex in question), but then at 183 the Supply curve becomes vertical. This is because, at least in the short-run (and with the prohibitively high construction costs mentioned in the article), the available stock of 2-bedroom apartments in this area is fixed. (For simplicity, we are looking only at this particular apartment complex, but a similar graph could be drawn for the entire Jackson Hole area).

The article goes on to describe how an influx of tourists has driven up demand for these available housing units (either from more workers wanting to live in the area, or from the tourists themselves wanting to rent the units). We can use the following graph to get a good idea of what this increase in Demand may look like:

We see that the increase in Demand creates a new equilibrium price at $1800. If the Supply curve remained upward sloping (perhaps if more 2BR housing units could be built quickly and cost effectively), the price would not increase as much. However, in the short-run, if we were to limit the price of housing so that it wasn't increasing by almost 50%, notice that the quantity demanded would exceed  housing units available to be rented, this high level of demand drives up the price substantially.

The article in question, however, also specifically points out that there is not an overabundance of apartment rental units to be found in Jackson Hole. Complaints describe how this limited availability is an extra and potentially undue burden on local residents. The problem is that the increased prices are a result of high demand and short supply. Imagine, for instance, if a price ceiling were enacted to maintain a maximum price of $1,250 per 2BR apartment. As can be seen in the following graph, the quantity demanded at this artificially low price would be enormous, and there would be many individuals who simply could not find an apartment to rent in the area at this price.

Some may worry that the market is not in a competitive equilibrium, but rather that the apartment complex has some monopoly power over the market. If this were the case, standard economic analysis would indicate that the monopoly would restrict the number of housing units they are renting out and raise the price, in order to increase profits. Under such a scenario, residents would have reason to complain of limited availability of housing and high prices. 

However, the info-graphic provided along with the article shows that this apartment complex is unlikely to have much monopoly power. It notes that only 6.2% of the units in Jackson are at the Blair Place apartment complex. If the market is competitive, then Blair Place would not be able to continue to find renters to voluntarily sign a lease at their property.

Ruling out monopolistic restrictions on quantity supplied (which would also assume there is not a large amount of collusion between apartment providers in the area), there is simply not much room to complain of higher prices. What better way to allocate the limited quantity of rooms than through a revealed willingness to pay?