Reply To: Prices of Consumer Goods Question (Gas prices)


Economic theory doesn’t tell us the particular reason for the lack of complete arbitrage or competition, just that they are incomplete is such cases. My example only discussed competition, i.e., buyers deserting high-priced sellers and patronizing low-priced sellers. Of course, the average gasoline buyer is not going to arbitrage, i.e., buy at a low price and resell at a high price. But, suppliers of gasoline to the gas stations might be able to arbitrage it. You would have to investigate the particulars of the case to find out whether they do or do not.