Hate Surcharges? Just Wait; the First Domino Already Fell
A resident of Austin was complaining on a local TV station about continuing energy surcharges — on prices of airplane tickets, electricity, and other things — at a time when oil prices have tumbled.
Presumably, instead of raising nominal prices, companies imposed surcharges last year to convince customers that the increases were temporary; but with the average variable cost of production down, why hasn’t competition forced prices down?
My advice to the woman is: wait, it will. We saw recently that US Airways backed down from charging for soft drinks; and I expect that as product demand declines further, some firm will break ranks and cut out surcharges — and others will follow shortly.
Consumers seem generally convinced about the existence of conspiracies; yet experience repeatedly shows us that it doesn’t take very many firms to get to a competitive solution — including the removal of surcharges when input prices fall back down.