4 ms·
How is the market rate determined in those places? If no one can lower prices unilaterally, it seems like price discovery just can’t happen.
by aesthesia 4y ago
How is the market rate determined in those places? If no one can lower prices unilaterally, it seems like price discovery just can’t happen.
- nradov 4y agoLowering prices isn't illegal. There are only certain very limited circumstances where selling below the market rate can potentially be illegal. One is dumping, where foreign companies sell at artificially low prices in an attempt to drive domestic competitors out of business. Another is when a domestic monopoly (or near monopoly) does the same. But if a fuel retailer wants to sell gasoline at $1 / gallon less than the competition then that's totally fine (although local law enforcement might be annoyed if that causes a traffic jam).
- pyuser583 4y agoWhere I live there’s a minimum markup law - a relic of the Great Depression. Certain goods must be marked up a certain percentage.
- pyuser583 4y agoGasoline and oil are commodities, so the price doesn’t change much from place to place. Lots of the businesses that sell gas don’t make any profit on it at all. They use gas to draw people in, and sell them other stuff, like overpriced headphones. The price of gas has more to do with what you’re buying if for than what you’re competitors charge. The drive around is defensive. If someone says “so and so is dumping gas at below market prices” you can defend yourself by showing competitors prices. Since the gasoline is a marketing technique, long term below market prices aren’t inconceivable. Edit: The real question is “why is the government opposed to low gas prices?” To be clear there is actually a minimum markup law where I live, so it’s not just anti-dumping. This is supported mostly by old school Democrats.