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That doesn't actually follow. If the station across the street is selling at a loss, you can either keep prices high and make zero revenue, or sell at a loss an
by bo1024 7y ago
That doesn't actually follow. If the station across the street is selling at a loss, you can either keep prices high and make zero revenue, or sell at a loss and make some revenue.
Of course you'll go out of business after a while below that floor so this situation wouldn't be sustainable, but it's consistent with economics that it could happen. (edit: I guess saudi arabia et al. are pretty much in this position now)
- jmalicki 7y agoWhy would making revenue be preferable in this case? If I have to buy gas for $1 a gallon from my supplier and can only sell it for $0.90, why not close up shop for awhile, then I don't have to deal with maintenance, don't have to pay the cashier, etc. Sure if you have fixed costs like debt you have to pay you may make a loss on your business as a whole, but selling at negative gross margins only makes sense if you're somehow being strategic about it.
- bo1024 7y agoI was assuming the station already paid for the gas...I think it depends on whether that's true or not.