The argument above was:
> I don't see why the distributor (or other middlemen) wouldn't simply pocket the price difference themselves. What would force them to pass it on to consumers?
> This would only work if the distributor had a monopoly on food sales in the US, or a monopsony on food imports to the US.
I'm saying that the independent distributors of gasoline have no monoply on the market, but still manage to ensure that they all get the same cut anyways. There's nothing stopping them all from agreeing to fix the market far above what the price could be because they see an opportunity for profit.
> I'm saying that the independent distributors of gasoline have no monoply on the market, but still manage to ensure that they all get the same cut anyways.
Naturally. That has to happen if you are selling a commodity. By literal definition, there is no way to differentiate yourself in the market. You cannot build a better OS for your gasoline or wheat to try and extract more profit. All you can offer is basic gasoline or wheat. The exact same gasoline or wheat as the guy across the street.
Why would a customer ever pay you more for the exact same thing as the guy across the street? Matching the price of your competition is the only hope you have of making a sale. If you don't take an identical cut, you won't have a business at all.
> There's nothing stopping them all from agreeing to fix the market far above what the price could be because they see an opportunity for profit.
You mean other than the practicalities of the real world that make it almost impossible to pull off?
Milk is another commodity. Being Canadian, you likely know that subject well given the events that are going on right now. Why do you think Canadian dairy farmers are shaking in their boots right now given that they can simply get together as a group and fix the price to fend off any changes that may come? They've already had decades of practice.
> Why would a customer ever pay you more for the exact same thing as the guy across the street? Matching the price of your competition is the only hope you have of making a sale. If you don't take an identical cut, you won't have a business at all.
But if that were the case, I'd expect that e.g. gasoline prices roughly follow the ups and downs of crude oil prices. However, the reality seems to be different:
> ... in Canada [...], and even though crude oil is half the price it was half a decade ago the gas prices seem to have crept back to where they were pre-plummet.
> But if that were the case, I'd expect that e.g. gasoline prices roughly follow the ups and downs of crude oil prices.
Why? Oil is an input for gasoline, no doubt, but it is also an input for wheat. If wheat diverges from the price of oil, nobody thinks twice. What's special about gasoline that requires that it follow the price of oil, despite being traded as a separate commodity?
There is a relationship between the price of oil and the price of gasoline, but not a direct one.
> I'm saying that the independent distributors of gasoline have no monoply on the market, but still manage to ensure that they all get the same cut anyways. There's nothing stopping them all from agreeing to fix the market far above what the price could be because they see an opportunity for profit.
Except for the fact that
(a) it's completely illegal
(b) every individual player has an incentive to undercut the others and profit, making the collusion unstable
The second is actually more significant than the first, because even if it weren't illegal, this setup would break apart pretty quickly at scale. (That bears out in practice: collusion with many parties tends to be unstable in the long run, and usually is only successful as long as the colluding parties can find a separate motivation to justify the collusion).
> And yet, cartels and illegal price fixing occurred pretty often in history.
There's a lot of research that's gone into this. Cartels (specifically multiparty cartels organized around price fixing) have rarely been stable for extended periods of time. The exceptions are usually either
(1) Domestic cartels which are able to gain the backing of the (nation-state) government that has jurisdiction over them
(2) Cartels which are able to find a separate motivation shared by all parties to justify the collusion
The first case is obviously not applicable to what we're talking about here. The second is what I already mentioned, and it's pretty rare (and not applicable to this situation either).
I'm saying that the independent distributors of gasoline have no monoply on the market, but still manage to ensure that they all get the same cut anyways. There's nothing stopping them all from agreeing to fix the market far above what the price could be because they see an opportunity for profit.