Researching Ammunition Pricing, Please Help

[freemjj]

Greetings INGO community:

I am a gun collector, shooting enthusiast and doctoral student currently working on a paper on the price elasticity of small arms ammunition. Yes, I know…strange combination!

I’m not writing this trying to “school” anyone, I am genuinely interested in your feedback to a theory. Moreover I am likely to post this same thing on several discussion boards, and apologize in advance if you end up seeing this in different places.

My question is this: did the ammo manufactures (and to a lesser degree retailers) that did NOT substantially raise prices during the 2012-2014 (or current for .22) ammo shortage potentially do the shooting community a disservice?

Here is what I mean: free markets work (when left alone) by prices being effectively negotiated between buyers and sellers. The stable price is the equilibrium point which maximizes profit. When ammo prices stayed artificially low to demand a home-grown secondary market was created where enterprising people figured out product delivery schedules and cruised every Wal-Mart in town buying every box of ammo they could despite the store’s attempts at purchase limits (or ammo never made it to the shelves because the employees grabbed it). All of this ammo subsequently showed up at gun shows, GunBroker, Craig’s list and local bulletin boards, etc. at dramatically higher prices. Had the manufacturers raised prices I am speculating that the hoarders / scalpers would not have been able to do this and there would be supply at your local sporting goods store (albeit at a much higher price) saving shooters the trouble of having to hunt for inventory. Moreover, in theory the extra profits generated would have gone to the manufactures that could have increased production capacity reducing the length of the shortage versus lining the pockets of the scalpers and extending it.

My hypothesis is that most manufactures didn’t raise their prices substantially because (a) they underestimated the huge demand and the length of time it would take for the ammo market to equalize, and (b) they didn’t want to damage their company and brand perception similar to the ire directed at retailers like Cheaper Than Dirt.

Thanks in advance for your thoughtfulness, I look forward to reading your responses!

 

[Cameramonkey]

The key is the retailers dont understand/care about the dynamics. They just know the path of least resistance. They are putting it on the shelf, and it is disappearing while $$ appears in the till. Anything else is not their problem.

But I do agree with the basic premise. If prices raised with demand, we wouldnt be here.

But beware. Prices are fast to climb, and slow to fall.

 

[Sniper 79]

You may be on to something here. You are right most retailers prices stayed the same despite the huge demand increase and they were left with empty shelves. When demand goes up so should the prices. In this case prices did but only for the knuckle head scalpers.

This has affected not only ammo but hand loading components as well.


Why do people panic in the first place? Why do they pay inflated prices to the scalpers? My friend Mike is gladly paying 60 a brick for .22lr. Makes me sick. My .22's are up for sale. Not worth it to me any more.

Great idea for a paper. Would like to read it when your done.

 

[Mgderf]

For every action, there is an equal, and opposite reaction.
It's a law of nature. Any artificial stimulation or restrictions on free trade adversely affects the market.

I have not been personally affected by the .22lr shortages in recent years.
I routinely had a couple hundred rounds on-hand since the early 1970's, because I'm a squirrel hunter who would rather use a rim-fire than a shotgun for tree-rats.
I've also just loved to plink since I've been big enough to shoulder a Daisy Red Rider BB gun.
Having .22lr ammunition in my house has been like having food in the house for as long as I can clearly recall.

In 2006-7 I saw the writing on the wall. I started buying a brick or two a month, or when I could afford it. I don't believe I paid more than $18 for a brick of 500 or 525-550...rounds.
I have still not paid more than $18 for a brick of .22. I haven't bought any since it went north of that point.
When the panic of 2008 hit, I was sitting on something just over 14,000 rounds of .22lr.
I bought a couple of single-shot rifles to slow the consumption even further. On a side note, I find I enjoy the slow, methodical, single-shot process even more than I do the rapid-fire of a semi-auto. I still like my 10/22, but that 1885 Low-Wall in .22lr is a dream to shoot.

Over the past few years I've given away a few thousand rounds (youth shoots, as extras with Cricket rifle giveaways...) and shot what I want to shoot and when. This past Fathers Day my family had our annual Fathers Day shoot-out. The whole extended family attended. I took a half dozen different .22's for everyone to enjoy, and they did.
I took an open brick, about 350-400 rounds. There must have been 150-200 rounds left at days end.
I gave the remainder to my nephew to feed his 10/22.

I think I'm sitting at something like 6-7k now.
I am just now starting to get a little antsy feeling so I'll probably slow down my donations a bit.

I just saw an article about a new ammo manufacturer opening doors in Indiana, and focusing to start on .22's
With any luck, maybe that will bring prices down a little in Indiana.
I wonder if they will have a retail outlet where you could pick-up online sales.

Markets fluctuate due to many things, supply and demand are only a part of the equation.

 

[pudly]

I’m not writing this trying to “school” anyone, I am genuinely interested in your feedback to a theory. Moreover I am likely to post this same thing on several discussion boards, and apologize in advance if you end up seeing this in different places.

My question is this: did the ammo manufactures (and to a lesser degree retailers) that did NOT substantially raise prices during the 2012-2014 (or current for .22) ammo shortage potentially do the shooting community a disservice?

Here is what I mean: free markets work (when left alone) by prices being effectively negotiated between buyers and sellers.

First, but your basic premise is flawed. Prices are only one factor in a free market, though the one that economists spend the most time on. Customer relationships, quality, etc are also important factors, but not ones that are as easy or objectively measured, so economists tend to ignore them in their oversimplified models. Talk to anyone doing business/marketing in the real world and they'll tell you that price is only one factor in sales/profits.

Second, you haven't identified anything affecting the free market here. Walmart limiting quantity/person is done as a free market choice. Cheaper than Dirt raising prices is a free market choice. Customers deciding which companies they want to deal with and at what prices are free market choices.

Third, like them or not, scalpers (and black marketers in other products like drugs) are part of the free market, but an element that only appears when there is a discrepancy between a natural market clearing price and actual retail price/availability. The key to understanding scalpers/black marketers in a particular market is understanding why they found an opportunity for arbitrage. This is usually about regulation or other factors interfering in the free market.

Fourth, in your OP, you talked about everything except that only factors interfering with a free market in ammunition sales- politics, regulation and the repeated threat of government intervention. In economic terms, look for the exogenous variables.

 

[actaeon277]

Maybe they were worried about being labeled "gougers".