http://news.yahoo.com/s/ap/20070509/ap_on_fe_st/odd_cheap_gas

Quote :

"A service station that offered discounted gas to senior citizens and people supporting youth sports has been ordered by the state to raise its prices. Center City BP owner Raj Bhandari has been offering senior citizens a 2 cent per gallon price break and discount cards that let sports boosters pay 3 cents less per gallon. But the state Department of Agriculture, Trade and Consumer Protection says those deals violate Wisconsin's Unfair Sales Act, which requires stations to sell gas for about 9.2 percent more than the wholesale price. Bhandari said he received a letter from the state auditor last month saying the state would sue him if he did not raise his prices. The state could penalize him for each discounted gallon he sold, with the fine determined by a judge. Bhandari, who bought the station a year ago, said he worries customers will think he stopped the discounts because he wants to make more money. About 10 percent of his customers had used the discount cards. Dale Van Camp said he bought a $50 card to support the local youth hockey program. It would have saved him about $100 per year on gas, he said. "

Can someone explain to me why there would be a law like this? I don't get it

5/9/2007 1:51:01 PM

a big chain could lower their prices for a while and put everyone out of business and then jack up prices? i don't know.

5/9/2007 1:53:55 PM

^prolly, and this is a perfect example of a law/regulation being taken way out of context.

5/9/2007 1:55:46 PM

makes sense now, thank you

5/9/2007 2:00:01 PM

Acts like these are intended to stabilize gas prices and eliminate market failures such as price gouging.

Keeping the profit margins at a set rate could also be an attempt to prevent larger stations from muscling out the smaller competition and creating an oligopoly.

5/9/2007 2:00:21 PM

Quote :

"a big chain could lower their prices for a while and put everyone out of business and then jack up prices?"

Exactly. We have the same thing in NC.

5/9/2007 2:33:24 PM

sarijoul is half right. The law is intended to refrain the local market from competition in general, as this example demonstrates it is not just large chains that fall victim to such laws. The purpose for such laws is fairly straight forward: gas station owners (including Walmart and BJs) constitute a vocal minority clamoring for government protection against competition, and a legal guarantee of profitability is quite valuable. This is not very different from other gift laws to various trade associations such as sugar, ethanol, etc., except this one is a gift to the Wisconsin State Association of Service Stations.

As for the second half of his theory, not once in recorded history has a competitor in a free market managed to set prices artificially low to drive out competition and then jack up prices. Not once has it been recorded to have happened in 600 years of economic history (to the best of my reading).

This is because such behavior would be suicidal: driving a neighboring gas station out of business does not make it go away; the land, building, pumps, and storage tanks are still there. After you jack your price back up, another firm can swoop in and buy up everything they need to compete with you at distressed prices (presumable the city or bank that repossessed the property is eager to recoup some of their losses while the unemployed workers are eager to get their jobs back, even at reduced pay). So, your reward for running up huge debts selling gasoline below cost is brand new competitors that both have lower costs and are not sadled with debt. This is even before we mention the time value of money, reputation destruction, demand destruction, etc. etc.

5/9/2007 2:49:42 PM

Quote :

"As for the second half of his theory, not once in recorded history has a competitor in a free market managed to set prices artificially low to drive out competition and then jack up prices. Not once has it been recorded to have happened in 600 years of economic history "

it's usually coupled with hoarding resources to prevent the new competitors from effectively supplying their stores, but since you can't buy up all the gasoline is the law really necessary? It seems like the limited availability of the resource is all the deterrent needed.

5/9/2007 2:56:11 PM

Now that is absolutely true, we have numerous examples of companies successfully hoarding a resource and jacking up prices that way. The most readily available example would be the De Beers Company which managed to corner the market for diamonds in the late 19th century. But there is very little evidence that it cut prices to drive its rivals out of business; on the contrary, De Beers was only able to buy out its competitors due to the unusually high profits it made selling at the reigning market price.

Another example would of resource hoarding would be the world's oil monopoly which goes by the name OPEC.

[Edited on May 9, 2007 at 6:02 PM. Reason : .,.]

5/9/2007 5:59:31 PM

Quote :

"a big chain could lower their prices for a while and put everyone out of business and then jack up prices? i don't know."

Just like Wal Mart does with everything else?

5/9/2007 6:13:04 PM

Wal-Mart jacks up prices? Since when?

They would go out of business real quick if they did that. There is plenty of competition in that industry.

5/9/2007 6:14:55 PM

how so does wal mart offer discounts when using a "cash card" bought from inside wallyworld? though i guess they might not do that up there

5/9/2007 8:53:13 PM

^^ Actually, Wal-mart's prices on most stuff is a little higher than average. They just have very visible loss leaders that give the impression of low prices.

5/9/2007 9:01:13 PM

Quote :

""a big chain could lower their prices for a while and put everyone out of business and then jack up prices? ""

Once the prices got jacked up, new competitiors would enter the market with lower prices...unless the big chain was able to use the gov't to prevent competitors from entering the market...using tools such as license requirements and pricing rules.

What you are witnessing is big gov't preventing a business from serving its customers as it sees fit.

[Edited on May 9, 2007 at 11:17 PM. Reason : .]

5/9/2007 11:17:35 PM

Freedom is not free. lol.

So the discount i get for getting a carwash with gas is illegal now?

5/9/2007 11:25:25 PM

^ I believe you get a discount on the car wash and not the gas itself. Unless you have an really cool gas station that you would like to tell me about (PM please ). But basically, yes, I guess that's one way to get around the law.

5/9/2007 11:32:26 PM

Quote :

"Actually, Wal-mart's prices on most stuff is a little higher than average. They just have very visible loss leaders that give the impression of low prices."

source?

[Edited on May 9, 2007 at 11:55 PM. Reason : a]

5/9/2007 11:55:30 PM

^Walking through the store is a probably his source. I wouldn't say the majority or even a decent percentage of items, but you can definately find some items in Wal-Mart that are priced higher than other places.

The man offered 2 and 3 cent discounts per gallon? Do the Wal-Marts in that state give the three cent discount per gallon from using their card like they do here in NC? How is that different?

5/10/2007 4:05:06 AM

^also add BJ's Gas for members (discounted rate) and Sam's club for members (Discount, although thats probably tied in with the Wal-Mart group)

5/10/2007 4:42:55 AM

^The discount rate for the BJs in Cary bumps the price down to what I typically see at regular gas stations in Raleigh. It's often higher. It's really only a discount when compared to very local stations.

2 or 3 cents per gallon huh? It seems like this would be a very difficult law to enforce in most cases since the price of gas can vary by as much as $0.20/g between gas stations on the same street.

5/10/2007 10:01:22 AM

Just as the banking industry ganged up on Wal-Mart when it attempted to create its own bank, now the medical community is attempting to use the fist of gov't to slam down Walmart's attempt to provide low-cost medical treatment with in-store clinics...

Quote :

"The Illinois State Medical Society, which represents more than 13,000 doctors, is pushing a proposed law to more closely monitor hundreds of in-store clinics being opened by retail giants Wal-Mart Stores Inc., Walgreen Co. and CVS/Caremark Corp. The doctors claim the clinics, staffed by advanced-degree nurses and physicians’ assistants, are largely unregulated and therefore put patients’ health at risk. The Illinois group said it also will lobby for federal laws aimed at increasing regulation of the clinics at the annual American Medical Association meeting next month in Chicago. “[Doctors] see this as a very big competitive threat to the traditional office-based physician,” said Todd Swim, a Chicago-based principal with Mercer Human Resource Consulting. “Employers have had on-site services like these staffed by nurse practitioners or physicians, and this, too, is preventative, routine medical care but hardly the scale and scope of a Wal-Mart. Whenever Wal-Mart sneezes the whole world shakes.” The potential loss of business for doctors is great because most health insurance companies are beginning to cover retail clinic procedures. The clinics are also designed as an option for low-cost care for the huge number of Americans who have no health insurance and would pay out of pocket "

http://walmartwatch.com/blog/archives/illinois_doctors_warn_against_in_store_clinics/

Here is great idea that will benefit thousands of low-income people. And doctors, fearing the comeptition, try to use gov't to stop it. This is a great example of the competitive market answering the needs of the consumers.

Where are the republican leaders standing up for capitalism?

5/10/2007 10:15:05 AM

Quote :

"source?"

Check it out for you self. Besides, this is Sam Walton's business model. Put stuff on the end of the aisles at ridiculously low prices and people will assume everything else is a great deal to.

While it may be true that Walmart's prices are consistently lower than most places (especially if you exclude warehouse stores), you can find almost anything in the store for better prices if you bargain hunt. If you bring quality into the equation, then Walmart really starts to look bad.

[Edited on May 10, 2007 at 10:40 AM. Reason : ?]

5/10/2007 10:40:20 AM

Walmart is consistently higher than its competitors as a result of its pricing strategy. I have done an in-dept investigation into the frozen pizza market (for school). In Clayton there is a Walmart just down the street from a Food Lion and they both sell Red Baron frozen pizza. Wal-mart's price is $3.69 everyday. Food Lion utilizes a "sale" customer differentiation pricing strategy. The price fluxuates week by week between $3.33 (3 for $10) and $4.99 (normal price). The purpose, of course, is to attract the price adverse individuals (such as myself) by having the cheapest pizza, $3.33. Meanwhile at the same time non-cost adverse individuals, who buy pizza every week regardless of price, end up paying an average of $3.33 + $4.99 / 2 = $4.16 for pizza. If we assume the grocery market is divided equally between cost and non-cost adverse individuals, we get the overall average retail price paid for pizza at Food Lion $4.16 + $3.33 / 2 = $3.745, which is just above the price charged everyday at Walmart.

So, since Walmart's competitors invariably utilize a "sale" differentiated pricing policy, with effort you can be reasonably assured of finding prices lower elsewhere for any individual item, only shopping at Walmart when the items you want are not on sale elsewhere. This is why I shop at Food Lion, because with a large enough freezer I can capture $3.33 pizza in quantities large enough to hold me over until the item is on sale again, usually two weeks, occasionally a whole month.

Disclamer: this analysis only applies to identical items between stores, in this case Red Baron Pizza. Walmart also sells off-brand pizza which is consistently cheaper than even Food Lion's off brand pizza on sale, but of reduced quality.

5/10/2007 11:23:50 AM

^^Or if you leave quality out of the equation where it should be, you then need to consider the customer loyalty cards such as Food Lion's MVC card.

Or if you use coupons and watch the sales papers, you can literally be paid to take some items out of the store as long as the cashier isn't a manager or take their job too seriously (Usually teenagers in the evening are the most carefree), and you other items actually give you a balance to pay. My mother does this quite often.

5/10/2007 12:26:34 PM