What I don't understand is why this doesn't work in the gas industry.
It only costs them $3 per barrel (unless it's from deep sea drilling( but yet every corporate owned station next to each other has nearly the same price and never "race to the bottom" like the pizza wars.
Demand. If they did lower the price somehow (say by executive fiat putting price controls on gasoline), there would be shortages. Nixon learned this the hard way. The price goes up, effectively rationing the gasoline to whoever will pay more for it.
i.e. there is an intersection by me that has 3 gas stations on it. They used to have identical pricing. Then one station started charging the same amount for credit card transactions as it did for cash(other stations had cc transactions cost 10 cents more per gallon)
result? that station is always packed...there is a line to actually get gas...while the other stations barely have any business.
So it costs them 10 cents out of $3.70 a gallon or 2.7%(you know the actual cost of cc transactions..that every business in the world pays without a second thought) to get market penetration.
And since now the cost of gas is pretty high, they are getting a ton of money, since every fill up gets them $40-80
Note I am not talking about the profits for individual stations.
I am talking about the profits for the wholesale suppliers, the major players in the oil industry which are the most profitable business in the history of humankind (yet still get huge tax breaks and even taxpayer funding for their research and development, recently renewed in Congress).
What I don't understand is why this doesn't work in the gas industry.
It only costs them $3 per barrel (unless it's from deep sea drilling( but yet every corporate owned station next to each other has nearly the same price and never "race to the bottom" like the pizza wars.