Confusopoly (With a Note on Retail Gasoline Market Strategies)

Michael Giberson

In case you missed it: a little economics courtesy of Scott Adams and Dilbert:

Some economists have asserted that Edgeworth competition in retail gasoline markets involves a variant of this strategy. If the same retail store always had the lowest price, even the most confused customer would eventually figure it out. Keep the prices bouncing around, and consumers have to engage in costly search.  Higher search costs should support higher margins by retailers.

(But note, too, that Edgeworth competition has been linked empirically to lower, rather than higher margins by retailers, so the assertion is contested. See this recent working paper from the FTC which surveys and adds to the research on the topic.)