I have never, ever understood this. Gas is for the most part is a simple commodity. Sure, some prefer a premium brand (like Shell) to a cheaper one (like ARCO), but I can’t for the life of me figure out why there is such a wide variance even within a single mile or two of a city (and amongst the same brand!) I would think that supply and demand would reign supreme here. It’s the same stuff.
You get that one gas station that charges $0.10 less than all the others in the area and the lines are out to the street.
So where are supply and demand?
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The problem is that you’re confusing simple pricing decisions with larger supply and demand issues. In other words – supply/demand is macro economics where as pricing decisions at the pump are more micro economics.
Additionally economics teachers/professor just love to talk about supply and demand issues but what they often don’t tell you or don’t talk about is all the other influences on pricing.
All you described is simply pricing competition – not actually supply and demand issues at work.
So one company is willing to sell their gas for 10 cents cheaper thinking they’ll more than make up for it with the increased customer volume.
Another store sees them undercutting the price and thinks “Man fuck that guy” and undercuts him by 10 more cents.
A third shop thinks “fuck both of them I’m keeping my price where it is because I’ve got the better gas” or whatever.
These are all individual pricing decisions and have very little to do with supply and demand.
Now there will always be people that believe other marketing hype about the cleaners in gasoline and how one company’s gas is better than someone elses and there might be some real merit to that. So the guy who doesn’t change his price may actually get a substantial number of customers.
But none of this has anything to do with supply and demand.
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