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Pastimes : Austrian Economics, a lens on everyday reality
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To: Don Lloyd who wrote (43)12/11/2001 2:17:39 PM
From: eddieww  Read Replies (1) of 445
 
"What must be remembered is that while the owners can set any price they desire, they cannot force anyone to pay that price."

I submitted:
"For instance, in Needles, CA. there are 5 gas stations, and the next nearest is 75 miles away. The owners of these stations get together for breakfast and form a local mini-cartel that fixes the price of gasoline 20% higher than is generally available elsewhere. Do the SUV owners in Needles wait for someone unwilling to join the cartel to open a new station?"

For the sake of discussion, let's say that the price agreed to by the mini-cartel is just low enough to keep citizens of Needles from driving the 75 miles to get gas at a 20% discount to the cartel's price.

I made it a mini-cartel of 5 rather than a single station to allow the discussion to reasonably include the case of a new entrant into the gasoline selling business in the cartel area. If one new entrant started to build a station, she would likely find it in her best interest to join the cartel, and the cartel to accept her and the slight reduction of margins her entrance would entail.

The important question, in my mind, is: Should the citizens of Needles, through the body-politic, restrain the cartel?
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