The OP said the higher price station has no convenience store, maybe that’s the reason, since normal markup on gas is very minimal, the other stations that sell sundries make up for it on snacks, but if you don’t have snacks, the only way to make any money is to increase the profit on the only item you sell?
That would not explain why consumers would choose to subsidize the station owner’s decision not to operate a convenience store, though.
As I follow this thread, I am becoming sympathetic to the “convenience of the lazy consumer” argument. It is appealing to me because I am, in fact, just such a lazy consumer. When I am heading down an unfamiliar major road and I need gas, I almost always scan only the right side for gas stations. They’re just plain easier.
Two possibilities;
- the guy enjoys a lot of business from rental car customers. businessmen don’t care about an extra 10 cents/gallon-they just want to fill the car up.
- the Mafia uses the station to launder money. If this is the case, they don’t care to sell anything.
I too am puzzled by consumer behavior regarding gasoline purchases-people will drive around all day to save 5 cents/gallon. I find this more than a little strange, if you are driving a $70,000 automobile-what does saving $1.00 on a fillup do for you?
The empirical question here is: Are they selling any gas? Do you see people filling up there? I suppose you could do a bit of unscientific sociololgical research and go ask 10 or 12 people filling up at the more expensive station why they are doing it.
That will answer the unasked question: Why do consumers buy gas at a station that charges more than a nearby competitor?
If the place is selling gas, then you can conclude that:
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They haven’t thought it through. They could be selling more gas if they charged less, and their overall profit would be higher.
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They have thought it through. While they could sell more gas if they charged less, the increased sales lead to more transaction costs, and with the higher price they have a higher margin (assuming this is true). In other words, the aggregate profits from lower-priced gas will be less than those from higher priced gas.
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They can’t make a profit on gas if they sell it for the price the nearby competitors do because their operating costs are higher.
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They’ve concluded, rightly or wrongly, that consumers aren’t sensitive to price differences. They are charging higher prices because people will pay them. Higher prices mean higher profits per sale. The higher profits offset whatever difference in overall sales results from consumer response to higher prices.
Bottom line though, if people are buying the gas at that price, it’s less of a mystery why they are charging that much.
It is my understanding that not all branded gas stations are necessarily wholly owned by the parent company. I.e., Shell owns and operates some Shell stations, while other Shell stations are independent and affiliated with Shell. The affiliated stations get to use the Shell infrastructure, but pay higher cost premiums than the wholly-owned stations. The affiliated ones have greater leeway in setting prices and such, though.
This is only what I’ve gathered from talking to gas company folks through work (we sell gas additives, bought by the gas companies). So, grain of salt on all that.
As for the additive treat rate, most of the “regular” grades are essentially equivalent whether you get them at a branded or independent station. There’s no incentive for anyone to boost treat rates on low-price gas grades. Large gas companies get their additives cheaper than indepentents would, of course; economies of scale add up.
Premium grades can have significantly higher additive treat rates, which is often what is being advertised – hence the “Techron” ad campaign a while back. When gas prices rise, though, customers switch away from premium grades, and so treat rates tend to go down.
So if you’re comparing “regular” prices (as seems to be the case) at brand-name gas stations, additive treat rates won’t be a factor in price differences.