6 ms·

I think you're over analyzing and confusing things. Price fixing is when competitors work together to raise prices above what they would normally be in a compet

by bogwog 2y ago

I think you're over analyzing and confusing things. Price fixing is when competitors work together to raise prices above what they would normally be in a competitive market. Using your gas station example, a gas station isn't going to look at a competitor selling gas at $4.15 and decide to raise their price to $4.45. They would lower their price to match the competition, otherwise they'd lose sales and make less money. Price fixing would be if both gas stations decided to raise their price to $4.45 at the same time so that customers don't have a choice.

andrew_eu 2y ago
The analogy also works in the opposite direction. If a gas station is selling at $4.10 a gallon and another down the street is selling at $4.15, the first gas station could happily up their price to $4.14. 1% more revenue and they're still the cheapest on the block.
- oooyay 2y ago
  Competitive markets keep things within a tolerance, imo. If the average is $4.10 then you can expect the price to vary up and down by some amount depending on location and other things provided. What RealPage does is distinct because it assures prices are always above and by orders of magnitude what they should be. It also achieves that through private communication which I think is generally accepted as a problem.
  - coredog64 2y ago
    Order of magnitude is generally accepted as starting at 10x. Are you saying rents are 10-100x higher because of RealPage?
    - oooyay 2y ago
      You're right, order of magnitude wasn't the right choice of words. They're 3-4x what they should be, and RealPage is responsible for a sizeable portion on its own, which is saying something.
- dwaltrip 2y ago
  And if there is a third also selling at $4.10? Unless they privately coordinate and collude, its hard for this to work for artificial price increases.
  - coding123 2y ago
    I think one thing that's weird to me is that Shell and Exxon or 76 or whatever all somehow got their gas to be somewhere in the same ballpark. You'd expect to see that some gas companies can't get their shit together and can't figure out how to extract, purify, and distribute gas at anything less than $500 per gallon. Now, naturally you'd expect those companies to just go out of business. And you'd also expect to see at least one that figures out how to do all of that for $1 per gallon. Yet, here they all are, selling it around the same price. It's too strange in my opinion. There is collusion happening in many markets. I suspect they are all producing it for way less which is why one of them doesn't suddenly go out of business, but the fact that they're not selling it so low that the competitors simply go out of business - again a collusion signal.
    - bogwog 2y ago
      Relevant: https://www.reuters.com/business/energy/us-senate-committee-probes-18-oil-producers-price-collusion-with-opec-2024-06-27/ https://www.reuters.com/business/energy/us-senate-committee-...
    - bluGill 2y ago
      They are all selling the same gas from the same refinery. They might have slightly different additives but otherwise it all comes from the same place. you can't afford shipping costs to get gass from a different refinery (unless you are on a territory border) the only question is how much profit to put on top and even then they have to be careful as if they go too low their competetors won't follow and then they have to pay extra for an unscheuled delivery just to fill their tank. i'm reasonable certian that small stations are illegally colluding in some cases.
    - curiouscavalier 2y ago
      Many do go out of business, and many substantially undercut others. This is particularly true for the diesel market, where OTR truck operators are more price sensitive. Most stations are buying gas around similar prices at the terminal, but their overhead to provide the station can vary wildly between large chains and small, family owned stations. “Skimmers” (drastically lower-priced diesel stations) are a real threat to larger chain stations. They don’t put them out of business entirely for a number of reasons, but one is because gas stations ultimately sell more than gas/diesel (e.g. a clean bathroom is often worth a few extra cents per gallon for me, but there’s a lot more than that too). Also any given station can’t sell an infinite amount of fuel. Beyond tank capacity, wait times are a real impact on sales volume, and so if a station offers a price too low (even if still profitable), it is just leaving money on the table. So not to say collusion doesn’t happen, but one can also arrive at similar pricing with a commodity like gas without it. Especially since fuel margins are typically low.
- AceyMan 2y ago
  The theory is correct, but the example is not the best: petrol prices are not as elastic as you'd think. If I need to make a left turn across traffic or go around the block I'm not topping off at a station just for 5 cents/gal. (Tho, I might make a mental note & use that station when I'm coming down the other way, when it's easy to in & out.) Los Angeles in particular is crazy. We have the equivalent to micro-climates with fuel prices. Stations a half mile apart can be 30¢ different. Stations a town apart can be 70–80¢ different. And there are a couple of stations in Beverly Hills adjacent that are ~$2.50 more than the going rate (no surprise there, tho).
jasode 2y ago
>, a gas station isn't going to look at a competitor selling gas at $4.15 and decide to raise their price to $4.45. They would lower their price to match the competition, otherwise they'd lose sales and make less money. But the airlines are also doing the opposite of your scenario: they also raise prices instead of lower them via legal "price signaling" via publicized fares[1] in the global reservations system. Competitors can converge on a higher price instead of a lower price. It's not just one direction. They just need to do it via public price signaling to stay out of legal trouble. In 2022, Apple Music raised their subscription from $9.99 to $10.99. Spotify then followed them and also raised their price to $10.99. By 2023, they both converged on $10.99. I think right now in 2024, Spotify is $1 higher at $11.99. Nobody should be surprised if Apple Music also raises its to $11.99. [1] https://www.google.com/search?q=It+is+now+common+for+an+airline+to+post+price+increases+on+a+Friday+afternoon%2C+which+then+become+available+in+the+CRSs+on+Saturday+morning.+If+its+competitors+in+the+markets+do+not+match+the+increase+by+Sunday+afternoon%2C+the+airline+then+withdraws+the+increase+Sunday+night%2C+so+that+the+original+lower+prices+are+in+effect+on+Monday+morning.11+If+its+competitors+match%2C+the+higher+fares+remain+in+effect.&oq=It+is+now+common+for+an+airline+to+post+price+increases+on+a+Friday+afternoon%2C+which+then+become+available+in+the+CRSs+on+Saturday+morning.+If+its+competitors+in+the+markets+do+not+match+the+increase+by+Sunday+afternoon%2C+the+airline+then+withdraws+the+increase+Sunday+night%2C+so+that+the+original+lower+prices+are+in+effect+on+Monday+morning.11+If+its+competitors+match%2C+the+higher+fares+remain+in+effect https://www.google.com/search?q=It+is+now+common+for+an+airl....
- bogwog 2y ago
  > Competitors can converge on a higher price instead of a lower price. It's not just one direction. They just need to do it via public price signaling to stay out of legal trouble. I don't understand what you're saying. Are you saying that companies are colluding, but not really because the prices are public? Most prices are public, just walk into any supermarket or open Amazon.com and you'll see public prices. If a company bases their price on a competitor's price, that's not collusion, that's just a pricing strategy. If a company is able to price a product above their competitors and still succeed (e.g. by investing more in marketing), that's legal too. > In 2022, Apple Music raised their subscription from $9.99 to $10.99. Spotify then followed them and also raised their price to $10.99. By 2023, they both converged on $10.99. I think right now in 2024, Spotify is $1 higher at $11.99. Nobody should be surprised if Apple Music also raises its to $11.99. Streaming is not an example of a healthy market IMO. I don't know the economics of it all, but I know all the streaming services need to pay the same record labels. Whatever is going on there, it's weird that they all cost the same. I currently pay $10.99/month for Tidal, which is the same exact price as most other services. I wouldn't be surprised if there was collusion going on there, maybe even something like RealPage behind the scenes. There's also the factor of Apple and Google's monopolies over apps, and I wonder if undercutting Apple/Youtube is bad for business. > But the airlines are also doing the opposite of your scenario: they also raise prices instead of lower them via legal "price signaling" via publicized fares[1] in the global reservations system. The link you posted seems to be a google search page? Not sure what you meant by that.
insane_dreamer 2y ago
> They would lower their price to match the competition, otherwise they'd lose sales and make less money. - they could also see their competitor raise their price to from $4.00 to $4.15 (for whatever reason) and decide that they can raise their price as well without losing customers.
- ssl-3 2y ago
  They can do both things, and both things are described by Edgeworth Price Cycles[0]. In gas prices, there's undercutting to draw business -- which seems natural in a free market. That's often smaller, local players who drive this stage, pricing things just below the nearby competition, but players of all sizes are involved. But sometimes, the price jumps up -- often by a significant margin, and across the board. This is often at the behest of a big player; when company like Exxon Mobil seemingly-arbitrarily raises gas prices in an area, it tends to set a trend. The smaller players tend to raise prices in accordance with this higher baseline and are happy to see the financial relief. This may seem counterintuitive in a competitive market, but it does happen anyway. And it's all temporary and cyclical, as we've all seen over and over again. Free markets aren't necessarily stable systems that are free of resonance. [0]: https://en.wikipedia.org/wiki/Edgeworth_price_cycle https://en.wikipedia.org/wiki/Edgeworth_price_cycle
jonas21 2y ago
If instead the 2 gas stations were both selling at $4.45 and looked around and decided not to lower their prices to $4.15 even though they could, it's equivalent.
- lukev 2y ago
  Or one of them could lower to 4.35 and take all the business. Which is normally what would happen without collusion.
  - BurningFrog 2y ago
    I don't have a source for this, so take it as you wish, but as I remember what I read, duopolies can be quite stable. Three party cartels can go either way. But with 4 or more participants, someone will inevitably betray the others out of greed.
    - lukev 2y ago
      Hence the other aspects of antitrust law. Albeit not enforced well of late.
jimbob45 2y ago
Price fixing would be if both gas stations decided to raise their price to $4.45 at the same time so that customers don't have a choice. Which was the case in this instance. RealPage required subscribers to use their price suggestion some percentage of the time or they'd risk losing their subscription.

by bogwog 2y ago

andrew_eu 2y ago

The analogy also works in the opposite direction. If a gas station is selling at $4.10 a gallon and another down the street is selling at $4.15, the first gas station could happily up their price to $4.14. 1% more revenue and they're still the cheapest on the block.

oooyay 2y ago
Competitive markets keep things within a tolerance, imo. If the average is $4.10 then you can expect the price to vary up and down by some amount depending on location and other things provided. What RealPage does is distinct because it assures prices are always above and by orders of magnitude what they should be. It also achieves that through private communication which I think is generally accepted as a problem.
- coredog64 2y ago
  Order of magnitude is generally accepted as starting at 10x. Are you saying rents are 10-100x higher because of RealPage?
  - oooyay 2y ago
    You're right, order of magnitude wasn't the right choice of words. They're 3-4x what they should be, and RealPage is responsible for a sizeable portion on its own, which is saying something.
dwaltrip 2y ago
And if there is a third also selling at $4.10? Unless they privately coordinate and collude, its hard for this to work for artificial price increases.
- coding123 2y ago
  I think one thing that's weird to me is that Shell and Exxon or 76 or whatever all somehow got their gas to be somewhere in the same ballpark. You'd expect to see that some gas companies can't get their shit together and can't figure out how to extract, purify, and distribute gas at anything less than $500 per gallon. Now, naturally you'd expect those companies to just go out of business. And you'd also expect to see at least one that figures out how to do all of that for $1 per gallon. Yet, here they all are, selling it around the same price. It's too strange in my opinion. There is collusion happening in many markets. I suspect they are all producing it for way less which is why one of them doesn't suddenly go out of business, but the fact that they're not selling it so low that the competitors simply go out of business - again a collusion signal.
  - bogwog 2y ago
    Relevant: https://www.reuters.com/business/energy/us-senate-committee-probes-18-oil-producers-price-collusion-with-opec-2024-06-27/ https://www.reuters.com/business/energy/us-senate-committee-...
  - bluGill 2y ago
    They are all selling the same gas from the same refinery. They might have slightly different additives but otherwise it all comes from the same place. you can't afford shipping costs to get gass from a different refinery (unless you are on a territory border) the only question is how much profit to put on top and even then they have to be careful as if they go too low their competetors won't follow and then they have to pay extra for an unscheuled delivery just to fill their tank. i'm reasonable certian that small stations are illegally colluding in some cases.
  - curiouscavalier 2y ago
    Many do go out of business, and many substantially undercut others. This is particularly true for the diesel market, where OTR truck operators are more price sensitive. Most stations are buying gas around similar prices at the terminal, but their overhead to provide the station can vary wildly between large chains and small, family owned stations. “Skimmers” (drastically lower-priced diesel stations) are a real threat to larger chain stations. They don’t put them out of business entirely for a number of reasons, but one is because gas stations ultimately sell more than gas/diesel (e.g. a clean bathroom is often worth a few extra cents per gallon for me, but there’s a lot more than that too). Also any given station can’t sell an infinite amount of fuel. Beyond tank capacity, wait times are a real impact on sales volume, and so if a station offers a price too low (even if still profitable), it is just leaving money on the table. So not to say collusion doesn’t happen, but one can also arrive at similar pricing with a commodity like gas without it. Especially since fuel margins are typically low.
AceyMan 2y ago
The theory is correct, but the example is not the best: petrol prices are not as elastic as you'd think. If I need to make a left turn across traffic or go around the block I'm not topping off at a station just for 5 cents/gal. (Tho, I might make a mental note & use that station when I'm coming down the other way, when it's easy to in & out.) Los Angeles in particular is crazy. We have the equivalent to micro-climates with fuel prices. Stations a half mile apart can be 30¢ different. Stations a town apart can be 70–80¢ different. And there are a couple of stations in Beverly Hills adjacent that are ~$2.50 more than the going rate (no surprise there, tho).

jasode 2y ago

>, a gas station isn't going to look at a competitor selling gas at $4.15 and decide to raise their price to $4.45. They would lower their price to match the competition, otherwise they'd lose sales and make less money. But the airlines are also doing the opposite of your scenario: they also raise prices instead of lower them via legal "price signaling" via publicized fares[1] in the global reservations system. Competitors can converge on a higher price instead of a lower price. It's not just one direction. They just need to do it via public price signaling to stay out of legal trouble. In 2022, Apple Music raised their subscription from $9.99 to $10.99. Spotify then followed them and also raised their price to $10.99. By 2023, they both converged on $10.99. I think right now in 2024, Spotify is $1 higher at $11.99. Nobody should be surprised if Apple Music also raises its to $11.99. [1] https://www.google.com/search?q=It+is+now+common+for+an+airline+to+post+price+increases+on+a+Friday+afternoon%2C+which+then+become+available+in+the+CRSs+on+Saturday+morning.+If+its+competitors+in+the+markets+do+not+match+the+increase+by+Sunday+afternoon%2C+the+airline+then+withdraws+the+increase+Sunday+night%2C+so+that+the+original+lower+prices+are+in+effect+on+Monday+morning.11+If+its+competitors+match%2C+the+higher+fares+remain+in+effect.&oq=It+is+now+common+for+an+airline+to+post+price+increases+on+a+Friday+afternoon%2C+which+then+become+available+in+the+CRSs+on+Saturday+morning.+If+its+competitors+in+the+markets+do+not+match+the+increase+by+Sunday+afternoon%2C+the+airline+then+withdraws+the+increase+Sunday+night%2C+so+that+the+original+lower+prices+are+in+effect+on+Monday+morning.11+If+its+competitors+match%2C+the+higher+fares+remain+in+effect https://www.google.com/search?q=It+is+now+common+for+an+airl....

bogwog 2y ago
> Competitors can converge on a higher price instead of a lower price. It's not just one direction. They just need to do it via public price signaling to stay out of legal trouble. I don't understand what you're saying. Are you saying that companies are colluding, but not really because the prices are public? Most prices are public, just walk into any supermarket or open Amazon.com and you'll see public prices. If a company bases their price on a competitor's price, that's not collusion, that's just a pricing strategy. If a company is able to price a product above their competitors and still succeed (e.g. by investing more in marketing), that's legal too. > In 2022, Apple Music raised their subscription from $9.99 to $10.99. Spotify then followed them and also raised their price to $10.99. By 2023, they both converged on $10.99. I think right now in 2024, Spotify is $1 higher at $11.99. Nobody should be surprised if Apple Music also raises its to $11.99. Streaming is not an example of a healthy market IMO. I don't know the economics of it all, but I know all the streaming services need to pay the same record labels. Whatever is going on there, it's weird that they all cost the same. I currently pay $10.99/month for Tidal, which is the same exact price as most other services. I wouldn't be surprised if there was collusion going on there, maybe even something like RealPage behind the scenes. There's also the factor of Apple and Google's monopolies over apps, and I wonder if undercutting Apple/Youtube is bad for business. > But the airlines are also doing the opposite of your scenario: they also raise prices instead of lower them via legal "price signaling" via publicized fares[1] in the global reservations system. The link you posted seems to be a google search page? Not sure what you meant by that.

insane_dreamer 2y ago

> They would lower their price to match the competition, otherwise they'd lose sales and make less money. - they could also see their competitor raise their price to from $4.00 to $4.15 (for whatever reason) and decide that they can raise their price as well without losing customers.

ssl-3 2y ago
They can do both things, and both things are described by Edgeworth Price Cycles[0]. In gas prices, there's undercutting to draw business -- which seems natural in a free market. That's often smaller, local players who drive this stage, pricing things just below the nearby competition, but players of all sizes are involved. But sometimes, the price jumps up -- often by a significant margin, and across the board. This is often at the behest of a big player; when company like Exxon Mobil seemingly-arbitrarily raises gas prices in an area, it tends to set a trend. The smaller players tend to raise prices in accordance with this higher baseline and are happy to see the financial relief. This may seem counterintuitive in a competitive market, but it does happen anyway. And it's all temporary and cyclical, as we've all seen over and over again. Free markets aren't necessarily stable systems that are free of resonance. [0]: https://en.wikipedia.org/wiki/Edgeworth_price_cycle https://en.wikipedia.org/wiki/Edgeworth_price_cycle

jonas21 2y ago

If instead the 2 gas stations were both selling at $4.45 and looked around and decided not to lower their prices to $4.15 even though they could, it's equivalent.

lukev 2y ago
Or one of them could lower to 4.35 and take all the business. Which is normally what would happen without collusion.
- BurningFrog 2y ago
  I don't have a source for this, so take it as you wish, but as I remember what I read, duopolies can be quite stable. Three party cartels can go either way. But with 4 or more participants, someone will inevitably betray the others out of greed.
  - lukev 2y ago
    Hence the other aspects of antitrust law. Albeit not enforced well of late.

jimbob45 2y ago

Price fixing would be if both gas stations decided to raise their price to $4.45 at the same time so that customers don't have a choice. Which was the case in this instance. RealPage required subscribers to use their price suggestion some percentage of the time or they'd risk losing their subscription.