News headlines say, “Orlando wants to prevent gas price gouging,” though the practice Orlando politicians want to stop isn’t price gouging, per se. Rather, the target of the proposal is gasoline retailers near Orlando International Airport who charge substantially higher gasoline prices than neighboring stations. The proposal would require gasoline stations near the airport to post prices in a standardized manner.
Normally, competition between gasoline retailers keeps prices from getting too far apart in a region because at least some customers engage in comparison shopping. Not all customers will comparison shop, and not even all price-aware customers will switch brands or delay refueling for a few pennies a gallon, so retail gasoline markets usually sport a range of prices.
But most of the time the difference between high and low is on the order of 15 or 20 cents a gallon. A station near the Orlando airport has had gasolines prices that almost doubled the prices of other gasoline retailers in Orlando (for example, as noted here before, prices at $4.99 a gallon with competitors asking $2.59 to $2.75 a gallon).
It is an interesting little business niche. Likely most of the sales go to tourists returning a rental car to the airport before hopping a flight home. Likely the tourists are in a rush, they want to refuel near the airport to avoid paying a refueling charge, and they don’t have a good idea on where to buy cheap fuel around the airport. The price isn’t posted on a roadside sign, but the tourist likely assumes, based on general market experience, that the price isn’t too far out of line with neighboring stations. Many start pumping the gas without checking the price on the pump – a few gag at the price but pump anyway – and a very few get back into the car and go in search of cheaper fuel.
The principled libertarian in me objects to imposing the price posting requirement as an infringement on the station owners’ freedom to operate his business the way he sees fit. The consequentialist in me, though, finds it hard to oppose the proposal. It seems a relatively targeted proposal to help consumers avoid paying the high prices that otherwise flourish in this little niche.
Maybe I should worry not so much about this narrowly targeted proposal itself, this minimalist nudge, but rather I should worry about a government that wants to expand its authority over voluntary deals between retailer and consumer. Is this the sort of nudge that eventually shoves society onto a slipperly slope down the road to serfdom?
The principled libertarian in me objects, but the overwhelming majority of the voices in my head say the benefits of this proposal will exceed the costs: targeted in scope and aimed at helping the consumer make an informed choice. Why not?