Walter E. Williams

In economics, we call this strategy predatory pricing. It?s an argument that has a ring of plausibility, but there?s little evidence anywhere anytime that a predatory pricing scheme produced results even remotely close to what would-be predators envisioned. Questioning this fairy tale and asking for evidence would never cross the mind of a legislator.

Another reason legislators can get away with establishing these minimum-price laws has to do with another economic phenomenon called "narrow well-defined benefits and small widely dispersed costs." The beneficiaries of the gasoline seller collusion are relatively few in number and well organized. The victims, mainly gasoline customers, are difficult to organize, and the costs they bear are relatively small and widespread.

In other words, how many gasoline consumers would be willing to spend their time and energy fighting to unseat a legislator whose actions imposed, say, a nickel a gallon additional cost upon them? It?s cheaper just to pay the nickel a gallon more and forget about it, but that?s not true about gasoline retailers. It is worth their time and energy to pressure legislators for minimum-price laws, and politicians know this.

Maryland is not the only state with statutory minimum gasoline prices. It?s joined by 12 other states, including New York, Michigan and Wisconsin. Wisconsin legislators have the gall to call its government-sponsored seller collusion the "Unfair Sales Act."


Walter E. Williams

Dr. Williams serves on the faculty of George Mason University as John M. Olin Distinguished Professor of Economics and is the author of 'Race and Economics: How Much Can Be Blamed on Discrimination?' and 'Up from the Projects: An Autobiography.'
 
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