Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Competition Law Everywhere

with 3 comments

sixt-par-rocco-siffredi-je-monte-souvent-a-plusieurs

In Montenegro, where I spent my hols, the price of a liter of gasoline is €1.38.

This price is the same everywhere in the country. And it is the same in all petrol station networks.

Me find this reasonably cheap as compared to most Western EU countries. But me also find this price curiously uniform.

Two obvious explanations spring to my obsessed antitrust mind: 1. cartel;  2. government regulation.

There’s worse though: a well-known car rental agency has confronted me with a real life example of abusive unfair pricing.

If you don’t return the car with the initial quantity of oil, the car rental company charges three times the price per missing liter of gasoline (!) – unless you pay black cash, in which case they charge you €1.5/liter to refuel the car…

I fully grasp that car rental firms want to recover vehicles with a sufficient quantity of gasoline, so as to avoid the costs of refueling them constantly.

But the alternative would be to charge customers for the missing quantity of gasoline at a rate equal to 1.38€ liter + an average increment covering the cost incurred for refuelling the vehicles.

I have not done the math short of data on this (+ I was on hols), but the 3x price formula looks really excessive.

The bottom line: yet another tactic that seeks to exploit the lazy mind bias of locked-in consumers.

Written by Nicolas Petit

3 September 2013 at 3:47 pm

Posted in Uncategorized

3 Responses

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  1. Incentives. It is the same logic as penalty clauses in contracts. Please bring me the tank full!

    jesus alfaro

    4 September 2013 at 11:59 am

    • Agreed Jesus. I thought about this initially. That would have been the most obvious ratio for the contract.

      But I remain skeptical. The penalty rule is not explicitly mentioned ex ante neither orally, nor in writing. If written somewhere, it must be in an Arial font 2 footnote, on the back side of a contract. And no one ever reads such contracts. So how can you change incentives if nothing is explained ex ante?

      In addition the rule does not purport to induce drivers to fully refuel the tank. It just says that you pay the difference between the initial tank level (which can be low) and the tank level on return day.

      Nicolas Petit

      4 September 2013 at 12:12 pm

  2. You are not the only Professor to return from holidays with an agenda!

    ‘Sometimes, a spot of collusion can be a very good thing’:
    http://www.ft.com/intl/cms/s/0/a08b7420-1405-11e3-9289-00144feabdc0.html?siteedition=uk#axzz2dvYTT9SJ

    Nick H

    5 September 2013 at 9:51 am


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