In most states, the phone company guarantees the prison a commission of a percentage on every call. The average commission is 42% of the cost of the call, but in some states it is 60%. So 60% of what families pay to receive a collect call from their imprisoned relative has nothing to do with the cost of the phone service. Also, the phone company that offers the highest commission is often the company to get the prison contract.
a. Who is practicing price gouging: the prison, the phone company, or both? Explain.
b. Evaluate the “fairness” of the prison’s commission.