We tend to forget that market capitalism, though based on competition, is really about social cooperation. When I go to the store for milk, the grocer and I are engaged in a socially cooperative venture. I am made better off by having the milk, and the store is made better off by having my dollars.
The same applies to students in that I am better off having their dollars and they are better off (I think) by having improved knowledge of how the world works and from being taught how and what to learn. I could actually even add the college as an intermediary that benefits from having the students' dollars and the students benefit from the college organizing and facilitating their education and then credentialing them. The college then benefits from my expertise and I benefit from the dollars that pass through from the student to the college to me.
In any market transaction, just like any positive social relationship, we are partners, not adversaries. We sometimes forget about this cooperative endeavor—a positive sum game—and view it as a negative sum game or some sort of adversarial relationship. If I make you better off, by default I must be made worse off. Similarly, we often view an employer as someone out to "screw us," or the employer views its employees as prospective thieves or loafers. Any or all of this can be true, but we too soon forget that we are partners with our customers, our employers, our employees, our suppliers, and so on and so on.
Seen as adversaries, it makes it difficult to effectively respond to unforeseen events, events that are often beyond the control of the person adversely affected.
Suppose I own a lumber mill and we agree that in six months I will provide you 100 board feet of walnut in exchange for $500, payable upon delivery. First, I offered you more value per dollar than anyone else was offering you for that $500, and second, you offered me more dollars for the resource costs I incur in producing the lumber. We are partners.
You had plans to use this lumber to make furniture that you hoped to sell for $5,000. Prior to delivery of the lumber, but after we made our deal, a downturn in the economy causes your customers to cancel their furniture orders. Consequently, you call me to cancel delivery of the lumber, which I had already invested my time and money in cutting down the trees and milling the wood into usable lumber. And because of the downturn, I, too, have no one else to sell it to. I don't want to incur this loss, so what do I do?
This is not an uncommon occurrence and we have formal rules to address how the situation is handled between two or more parties. But what is truly important to remember is that our relationship is a cooperative venture; you are a partner in my success and I am a partner in your success. You as the buyer of my lumber, and me as your supplier, are partners. We are both engaged in creating value for consumers of furniture. And those customers who buy your furniture are also partners just as are my suppliers of saw blades, energy, etc.. We are all engaged in a cooperative venture.
It does neither you nor I nor your customers nor my suppliers any good if one of us fails. Failure of one means we are unable to engage in cooperative ventures with that person or firm in the future. I certainly could hold you accountable for the deal we agreed to, forcing you to take delivery of the lumber, but it might not be in my best interest to walk you down the plank and watch you jump off the ship. It indeed might be if you are simply wasting resources, but that is something I have to figure out. If it's simply an unforeseen event that will someday be corrected, then it might be in my interest to forgive you.
The purpose of formal rules like those within the realm of contract law is to deal with just this type of situation. However, as Stewart Macaulay explained years ago, it is the informal rules that sustain cooperative ventures. I may have a formal claim against you, but it may be in my long-run interest to adhere to informal rules, either excusing you of your obligation to me or working out some alternative arrangement, both of which might require me eating part or all of the loss in order to keep you going. In doing so however, I preserve our cooperative venture that might otherwise be lost. I must weigh both the short-run and long-run costs and benefits from either action, but, barring fraud and/or complete ineptness on your part, my best bet is likely to excuse you.
This topic is brought on by this article from Christopher Elliott published on LinkedIna few months back. Should Priceline excuse this woman from her contractual obligation and refund her money, or should it make her eat the loss? She claims that she had to cancel the trip due to unforeseen circumstances, and that due to these unforeseen circumstances cannot now afford the expense. Priceline's policy is that once you click that "Accept" button, you must pay for whatever hotel or airline or rental car company accepts your offer. It may indeed be in Priceline's best interest to cancel this woman's reservation, which means they may take the loss since it is really an intermediary between this woman and the hotel (though Priceline keeps a big chunk of the proceeds), but it also has to protect itself from people fraudulently (or let's say unnecessarily) canceling their reservation contracts.
Priceline is essentially a means for airlines, hotels, and rental car companies to price discriminate. Effectively doing so requires these companies to segment their markets so that people (loyal customers and others with a more inelastic demand) willing to pay the rack rate don't see the discount rates the hotel is currently willing to offer those with a more elastic demand. Priceline facilitates this by a) not letting you know which airline, hotel, or car company is willing to accept your offer beforehand, and b) once they've identified their willingness to accept a lower price, preventing you from now opting out so you cannot go fishing for lower prices from your favorite hotel(s).
Should Priceline release this woman from her contract and refund her money? It depends. She is certainly not a loyal customer of the hotel, so the long-term relationship argument is irrelevant, at least as far as the hotel goes. And they could do so out of the kindness of their heart, but neither the hotel nor Priceline are in the business of providing charity. (Managers can certainly use their own money to do so, and shareholders may indeed agree to charitable giving, but managers have no right giving away shareholders' money without their consent.) But the biggest reason for doing so is the goodwill it can create for Priceline (and maybe the hotel) and the exposure the company may generate from its customer service. I have gone to two hotels now that we booked through Priceline and promised to discuss them positively on social media if we get an upgrade or are treated favorably. Both responded and served us well.