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To: eddieww who wrote (42)	12/11/2001 1:55:51 PM
From: Don Lloyd	Read Replies (1) \| Respond to of 445

eddieww - I would think it obvious that the owners in this hypothetical are acting in their own best interest by collectively increasing their margins. It's more complicated than that. What must be remembered is that while the owners can set any price they desire, they cannot force anyone to pay that price. They might set a price of $10K per gallon, or 1 cent per gallon. It should be fairly clear that the owners will be better off setting a price somewhere in between those extremes. Exactly what the best price will be is enormously complex, but a large part of the answer is what the owners believe the price elasticity of demand (discussed in an earlier post) that they face to be. I believe that this problem probably is best broken up into two parts. The part of lesser importance deals with the instability of cartels and the part that you are likely to be more interested in is changing the problem to a single station. As for what the government can do: they can do whatever they choose based on their firepower. All governmental power rests, at bottom, on punitive capability. The question is what should they do, if anything? Yes, my question was not about the power to do anything, but about whether any specific action has consequences that outweigh any perceived advantages. Regards, Don