Friday, August 18, 2017

Fake Eclipse Sunglasses

Like many, I will stop my day to experience the solar eclipse on Monday. Many will regret it. As the WSJ reports, they will have stared up at the sun thinking their eyes were protected by special sunglasses that "can filter out tens of thousands of times as much light from the sun as sunglasses." Instead, they will be exposing their eyes to potential harm from counterfeits.
Mr. Jerit said some dealers on Amazon have created copycat versions of his company's Soluna brand of eclipse glasses, sold by GSM Sales LLC. He says the knockoff Solunas are replicas down to the logo, design and product information printed on the frames, and often are sold at much lower prices. A pack of 10 legitimate Soluna eclipse viewers cost $39.95 on Amazon as of Aug. 4

This is a case of a very large and very temporary expansion in demand. Supply cannot increase fast enough making price rise temporarily. But even more, the new temporary demanders are not as discerning about quality as the traditional customers. These are the characteristics that permit moral hazard. With a higher price, there is room low cost producers to enter temporarily with sub-standard products.

I am predicting that ophthalmologists will be busy over the next few months.


3 comments:


  1. In the case of sellers who are selling the fake eclipse sunglasses, this is clearly an example of the market demand exceeding the market supply. Since this is a very case specific surge in demand centered on an event that is happening soon, causing a surge in both price and demand. With the surge in price, the market equilibrium which “is the price at which quantity supplied equals quantity demanded (Froeb et al., page 99),” clearly shows that demand exceeded the original market price of the sunglass filters for the solar eclipse. The prices in this case are the “primary mechanism that market participants use to communicate with one another (Froeb et al., page 104).” The unfortunate factor in this demand surge is not only that the price increase that is reflective of what the buyers in the market are willing to pay, but it has also allowed others to enter the market with inferior products, selling at a premium. The other sellers entering the market with their products that are not only lesser in quality but that may make false claims, and not provide the needed protection to the consumer is an example of the hidden actions that are synonymous with moral hazard. “Moral hazard is caused by hidden actions (Froeb et al., page 254)” in this case the copycat solar sunglass sellers are intentionally disguising their inferior product to look and appear the same as the legitimate product with no regard for the consumer.

    Froeb, L.M., McCann, B.T., Shor, M. and Ward, M.R. (2016). Managerial economics: A problem solving approach, 4th ed. Cengage Learning

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