Is it because they can signal price changes to each other without explicitly colluding? That seems too cynical an answer.
2007-03-07 07:16:27 · 9 answers · asked by fernpalmnj 1 in Social Science ➔ Economics
How about simple supply and demand, and needing to be where there's sufficient traffic?
A busy intersection easily gets enough traffic to support 2 gas stations.
If they are not directly competing for the same business -- even better. For example, if one is a discount gas station that just sells gas at lower prices for cash, while the other one has higher prices but takes credit cards and has a service station and a full convenience store, they are not necessarily competing for the same business.
2007-03-07 07:20:40 · answer #1 · answered by Investor 2006 3 · 0⤊ 0⤋
Two things against the signal price mechanism:
1) There's alternative mechanisms to signal price change - some evidence of collusion, but more often than not gas stations compete (today, anyway) on the basis of credit cards (and rebates) and convenience services.
2) Signal pricing isn't always followed - how often have you seen an Ayerco price three cents lower than a BP?
It's more of a co-location decision, in my opinion. A gas station locates at the intersection of a major road because it is the intersection of a major road. Other gas stations do the same because it is an optimal location to draw customers, who probably would shop prices anyway. Similarly, there are commercial districts because these locations allow good access and are reasonably close to population centers.
2007-03-07 15:24:48 · answer #2 · answered by Veritatum17 6 · 0⤊ 0⤋
I would assume they were rivals, and also that both would want to be close to the high traffic areas, stealing customers from the other station by luring costumers with specials and improved services.
2007-03-07 15:23:15 · answer #3 · answered by Linda L 3 · 0⤊ 0⤋
IT is the fact that the first station found a very good spot... IE a lot of people pass it. They are just engaged in very agressive competition.
2007-03-07 15:19:09 · answer #4 · answered by mjolnir1174293 2 · 1⤊ 0⤋
It is probably a combination of zoning laws and the fact that the best place for one is on the corner.
2007-03-07 15:19:52 · answer #5 · answered by Barkley Hound 7 · 0⤊ 0⤋
Zoning laws
2007-03-07 15:27:15 · answer #6 · answered by ideogenetic 7 · 0⤊ 0⤋
Generally it relates to the convenience of homes, shopping & working environments(places) nearby.
2007-03-07 15:22:09 · answer #7 · answered by cawillms 3 · 0⤊ 0⤋
Many of them are independently owned. It's all about competition and free-market society.
2007-03-07 15:19:12 · answer #8 · answered by pokecheckme 4 · 0⤊ 0⤋
competition!!!! competition !!!competition!!!!!!!!!!!!!!!!!!!!
2007-03-07 15:19:12 · answer #9 · answered by tewarienormy 4 · 0⤊ 0⤋