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In general, individual consumers expect sellers to increase the price above the cost of goods in exchange for decreasing the exposure of the consumer to volatil

In general, individual consumers expect sellers to increase the price above the cost of goods in exchange for decreasing the exposure of the consumer to volatility. A case could be made that gas prices violate this expectation, by transmitting sharp price shocks to consumers in violation of the unspoken agreement. I remember something about how gas prices quite reliably go up rapidly and go down very slowly, which doesn't at all reflect a market that's allowed to 'float'. It seems as though gas prices are building in their own 'fixed' problem: shock-tremor resilience into a very low rate of decline in prices, paired with a very high rate of incline in prices, in order to buffer against market shocks in a way that "boils the frog" so that consumers don't realize it. Are there any examples of an industry that transmits price shocks directly to customers, with equal responsiveness in both directions, regardless of the opportunity to sellers exploited by gas prices today?

AnthonyMouse 6y ago
> In general, individual consumers expect sellers to increase the price above the cost of goods in exchange for decreasing the exposure of the consumer to volatility. Most markets neither have nor want this. If there is a freeze in Florida, the price of oranges goes up. If someone discovers a large new deposit of cobalt, the price of cobalt goes down. If there is a flood in Thailand, the price of hard drives goes up. If a patent expires on a drug, the price of the drug generally goes down. > I remember something about how gas prices quite reliably go up rapidly and go down very slowly, which doesn't at all reflect a market that's allowed to 'float'. It's just a reflection of imperfect competition. If the price they have to pay goes up then they raise prices immediately because there is no point in attracting customers with low prices so that you can sell to them at a loss. Once wholesale prices come back down, not lowering prices until your competitors do allows you to charge higher margins. But lowering your prices increases your customer volume, so eventually somebody does and then the others have to follow. The fact that this doesn't happen immediately is a reflection of the fact that there are only tens and not thousands of local competitors.

AnthonyMouse 6y ago

> In general, individual consumers expect sellers to increase the price above the cost of goods in exchange for decreasing the exposure of the consumer to volatility. Most markets neither have nor want this. If there is a freeze in Florida, the price of oranges goes up. If someone discovers a large new deposit of cobalt, the price of cobalt goes down. If there is a flood in Thailand, the price of hard drives goes up. If a patent expires on a drug, the price of the drug generally goes down. > I remember something about how gas prices quite reliably go up rapidly and go down very slowly, which doesn't at all reflect a market that's allowed to 'float'. It's just a reflection of imperfect competition. If the price they have to pay goes up then they raise prices immediately because there is no point in attracting customers with low prices so that you can sell to them at a loss. Once wholesale prices come back down, not lowering prices until your competitors do allows you to charge higher margins. But lowering your prices increases your customer volume, so eventually somebody does and then the others have to follow. The fact that this doesn't happen immediately is a reflection of the fact that there are only tens and not thousands of local competitors.