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> "You" being the distributor, not the final consumer. I don't see why the distributor (or other middlemen) wouldn't simply pocket the price difference themselv

> "You" being the distributor, not the final consumer. I don't see why the distributor (or other middlemen) wouldn't simply pocket the price difference themselves. What would force them to pass it on to consumers? This would only work if the distributor had a monopoly on food sales in the US, or a monopsony on food imports to the US. Thankfully, this is not the case for anything except for specialty imports.

SketchySeaBeast 8y ago
I'm not sure if it's the same in the states, but in Canada it's remarkable how all the gas stations, owned by different corporations, all seem to have price fluctuations at the same time, and even though crude oil is half the price it was half a decade ago the gas prices seem to have crept back to where they were pre-plummet. If all the distributors know the game, they find ways to work together.
- randomdata 8y ago
  What is remarkable about it? That's what happens when you are selling a commodity. There is nothing to set yourself apart in the marketplace, so you have no choice but to sell at the same price as everyone else or decline sales until the market improves. RBOB is publicly traded commodity at that. It is not exactly a mystery to sellers what the market price is. The buyers literally publish what they are willing to pay and the sellers decide if they agree to it or not. As a cash crop farmer, it is the same deal for us. We're told what the price is and it's a take it or leave it situation. We're growing commodities, so if I want more money than the customer is willing to spend, the buyer has no issue going to my neighbour who grows the exact same crops. It makes no difference to them. And thus, if I also want to sell at that time, I have no choice but to match every other farmer. If I offer an even lower price, every other farmer will have to match me if they want to sell.
  - SketchySeaBeast 8y ago
    The argument above was: > I don't see why the distributor (or other middlemen) wouldn't simply pocket the price difference themselves. What would force them to pass it on to consumers? > This would only work if the distributor had a monopoly on food sales in the US, or a monopsony on food imports to the US. I'm saying that the independent distributors of gasoline have no monoply on the market, but still manage to ensure that they all get the same cut anyways. There's nothing stopping them all from agreeing to fix the market far above what the price could be because they see an opportunity for profit.
    - chimeracoder 8y ago
      > I'm saying that the independent distributors of gasoline have no monoply on the market, but still manage to ensure that they all get the same cut anyways. There's nothing stopping them all from agreeing to fix the market far above what the price could be because they see an opportunity for profit. Except for the fact that (a) it's completely illegal (b) every individual player has an incentive to undercut the others and profit, making the collusion unstable The second is actually more significant than the first, because even if it weren't illegal, this setup would break apart pretty quickly at scale. (That bears out in practice: collusion with many parties tends to be unstable in the long run, and usually is only successful as long as the colluding parties can find a separate motivation to justify the collusion).
      - xg15 8y ago
        And yet, cartels and illegal price fixing occurred pretty often in history.
        chimeracoder 8y ago
        > And yet, cartels and illegal price fixing occurred pretty often in history. There's a lot of research that's gone into this. Cartels (specifically multiparty cartels organized around price fixing) have rarely been stable for extended periods of time. The exceptions are usually either (1) Domestic cartels which are able to gain the backing of the (nation-state) government that has jurisdiction over them (2) Cartels which are able to find a separate motivation shared by all parties to justify the collusion The first case is obviously not applicable to what we're talking about here. The second is what I already mentioned, and it's pretty rare (and not applicable to this situation either).

SketchySeaBeast 8y ago

I'm not sure if it's the same in the states, but in Canada it's remarkable how all the gas stations, owned by different corporations, all seem to have price fluctuations at the same time, and even though crude oil is half the price it was half a decade ago the gas prices seem to have crept back to where they were pre-plummet. If all the distributors know the game, they find ways to work together.

randomdata 8y ago
What is remarkable about it? That's what happens when you are selling a commodity. There is nothing to set yourself apart in the marketplace, so you have no choice but to sell at the same price as everyone else or decline sales until the market improves. RBOB is publicly traded commodity at that. It is not exactly a mystery to sellers what the market price is. The buyers literally publish what they are willing to pay and the sellers decide if they agree to it or not. As a cash crop farmer, it is the same deal for us. We're told what the price is and it's a take it or leave it situation. We're growing commodities, so if I want more money than the customer is willing to spend, the buyer has no issue going to my neighbour who grows the exact same crops. It makes no difference to them. And thus, if I also want to sell at that time, I have no choice but to match every other farmer. If I offer an even lower price, every other farmer will have to match me if they want to sell.
- SketchySeaBeast 8y ago
  The argument above was: > I don't see why the distributor (or other middlemen) wouldn't simply pocket the price difference themselves. What would force them to pass it on to consumers? > This would only work if the distributor had a monopoly on food sales in the US, or a monopsony on food imports to the US. I'm saying that the independent distributors of gasoline have no monoply on the market, but still manage to ensure that they all get the same cut anyways. There's nothing stopping them all from agreeing to fix the market far above what the price could be because they see an opportunity for profit.
  - chimeracoder 8y ago
    > I'm saying that the independent distributors of gasoline have no monoply on the market, but still manage to ensure that they all get the same cut anyways. There's nothing stopping them all from agreeing to fix the market far above what the price could be because they see an opportunity for profit. Except for the fact that (a) it's completely illegal (b) every individual player has an incentive to undercut the others and profit, making the collusion unstable The second is actually more significant than the first, because even if it weren't illegal, this setup would break apart pretty quickly at scale. (That bears out in practice: collusion with many parties tends to be unstable in the long run, and usually is only successful as long as the colluding parties can find a separate motivation to justify the collusion).
    - xg15 8y ago
      And yet, cartels and illegal price fixing occurred pretty often in history.
      - chimeracoder 8y ago
        > And yet, cartels and illegal price fixing occurred pretty often in history. There's a lot of research that's gone into this. Cartels (specifically multiparty cartels organized around price fixing) have rarely been stable for extended periods of time. The exceptions are usually either (1) Domestic cartels which are able to gain the backing of the (nation-state) government that has jurisdiction over them (2) Cartels which are able to find a separate motivation shared by all parties to justify the collusion The first case is obviously not applicable to what we're talking about here. The second is what I already mentioned, and it's pretty rare (and not applicable to this situation either).