Gas Stations Cluster Together

Case:

Gas Stations cluster together:

-location matters

-location is most important differentiator

-drive into intersection, see all gas stations, then look at all prices and choose cheapest

-this causes price war

-agglomeration effect

-demand at an intersection is biggest

-if one gas station is full, choose another

-some differentiation because of location (not willing to drive across the street)

first price you put out is the one that frames the value of the product

-if you come in and see 180 marked down from 300, you feel good about it - the 300 frames how you feel about paying 180 (important in fashion goods)

-fashion goods - women bathing suits, the price is the only thing you have to frame the value, not the fabric

-people who care about fashion are usually price insensitive and will pay the higher price

2. competition based pricing

-look at market place and see what competition is charging

P = Competition price + or - x

-x means if your product is better, set the price higher; if your