Updated: Oct 31st, 2008 My brother has now provided further clarification of the principle and has given this m0vement the moniker NOPE for Not One PEnny. Please see his comment below for more discussion and additional tie breaker rules.
I have to credit my brother Ron for the topic of this post. The catalyst for this entry was that I actually acted upon his theory twice while traveling around Northern Illinois and Southern Wisconsin this weekend. So about now, you are wondering what this theory is all about. Ron and I have had numerous discussions regarding the price of gas. During one of these discussions, he detailed out a plan to influence market pricing for gas. It is actually fairly simple in understanding and execution, but the dilemma is that it has to be regionally followed or it will have little impact on the overall pricing. If collectively executed, I think it may change the way the market looks at demand based pricing. Ron never gave a clever title to his concept, so I am going to go ahead and label it for him…. he is definitely welcome to change it if he wants. So here goes.. ready… The 3P Principle or expanded… the Perfect Petro Pricing Principle. Unlike most economic principles these days, this one doesn’t take a thesis to explain. In fact, it only takes a sentence. If there are multiple gas stations in reasonable proximity, ALWAYS go to the station with the lowest displayed price even if it requires an inconvenience to get to the location or wait an additional amount of time waiting for a free pump. Now that was not that difficult was it? The heart of the theory is market based pricing. There is absolutely no way an establishment can continue pricing different than a competitor who has the same customers. Eventually, depending on his loss longevity, the price will have to come down to at least match the other businesses…. and ideally, from a capitalist point of view, he might re-price down below the competitors to win back some of the lost customers. That sets up another round of discounts from the rest of the competitors. There are some quirks to the principle due to some options like the level of octane that is provided, what detergent is included etc. But apparently the gas stations don’t really think this is important to you or they would actually put it on their sign next to their displayed gas prices so you could decide how much YOU really care about it. If you are not driving a high end vehicle, I doubt you care if it is 87 or 89 and in the Midwest just assume it has 10% Ethanol in it. So instead of just complaining about the high prices or bandwagoning on the dependency of foreign oil so we must go green crap, do something about it and start following the 3P Principle (or whatever he decides to call it)
Doing my part this weekend, I had the chance to make this choice twice. The first time was South of Rockford IL in a small town called Rochelle…. and as I say everytime I pass that city: “Rochelle Rochelle, a young girl’s erotic journey from Milan to Minsk” If you are a Seinfeld fan, you should be laughing now. Anyway, we had to fill up for gas and as usual on the interstate, there were three filling stations to choose from. Two of them were at $2.99/gallon and the other one was at $2.84. Even though we had to drive 500 feet extra and wait for a light, I made my wife go to the cheaper gas. Of course, there were some customers at the other stations paying too much, but it will probably take a little while to get the word out on this genius plan. We filled up and went on our merry way having lost only about 4 minutes extra due to seeking out the cheaper price.
The second time was up in Lake Geneva, but it slightly backfired on us but on reflection, the proximity parameter really wasn’t met. We drove into Lake Geneva off of Rt 12 on the East side of the lake. The gas price at that particular spot was $2.95. We were still okay on the guage, so we completely traversed to the West side via the southern Lake Shore drive. On that end, there was a gas station displaying $2.85. Can someone please tell me why the gas is priced differently a mere 20-30 miles away? We noticed the cheaper gas, but the guage was still in our favor so we started heading back to the East, but this time via the North side. Unfortunately, I made my wife take a wrong turn which literally brought us back down to the exact same point we saw the $2.85 station. Yes, I heard about that for at least 20 minutes straight. At that point I decided it was an omen so I made her stop for gas. Unfortunately, when we retraced our Northern route, we passed another gas station that had $2.84 displayed…. still better than $2.95 though. So, we did our part this weekend. A few more thousand regionally concerned citizens and we should start seeing a true impact.
All credit goes to my brother Ron! now about that nomogracult thing…
Life Intrigued 